7079562 Human Resource Management

Human Resource Management

School of Distance EducationBharathiar University, Coimbatore - 641 046

MBA First YearPaper No. 5

Author: VSP Rao

Copyright © 2007, Bharathiar UniversityAll Rights Reserved

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SCHOOL OF DISTANCE EDUCATIONBharathiar UniversityCoimbatore-641046

CONTENTS

Page No.

Unit-I

Lesson 1 Human Resource Function 7

Lesson 2 Trends in HRM 16

Lesson 3 Line and Staff Functions 24

Unit-II

Lesson 4 Job Analysis 37

Lesson 5 Recruitment and Selection Process 45

Lesson 6 Building Employee Commitment 57

Lesson 7 Employee Testing and Selection 65

Unit-III

Lesson 8 Orientation & Training 87

Lesson 9 Developing Managers 101

Lesson 10 Performance Appraisal 115

Lesson 11 Managing Careers 133

Lesson 12 Managing Promotions and Transfers 143

Unit-IV

Lesson 13 Establishing Pay Plans 153

Lesson 14 Pay for Performance and Financial Incentives 170

Lesson 15 Benefit and Services 185

Unit-V

Lesson 16 Industrial Relation 205

Lesson 17 Collective Bargaining 214

Lesson 18 Grievances Handling 228

Lesson 19 Labour Welfare 239

Lesson 20 Auditing HR Functions 253

HUMAN RESOURCE MANAGEMENT

Number of Credit Hours : 3 (Three)

Subject Description: This course presents the human resource functions, recruitment, placement,training, development, compensation, managing quality, labour relations and employee security.

Goal: To enable the students to learn the importance of the human resources, recruitment andtraining and also the importance of the labour relations in the organization.

Objectives: On successful completion of the course the students should have:

1. Understood the changing environment of the HRM and the role of the HR managers.

2. Learnt the recruitment process and the application of the IT.

3. Learnt the importance of the training and development.

4. Learnt about the pay plans, performance appraisal and compensation.

5. Learnt the importance of the labour relation, the employee security and collective bargaining.

UNIT I: Human Resource Function

Human Resource Philosophy – Changing environments of HRM – Strategic human resourcemanagement – Using HRM to attain competitive advantage – Trends in HRM – Organisation of HRdepartments – Line and staff functions – Role of HR Managers.

UNIT II: Recruitment & Placement

Job analysis : Methods - IT and computerised skill inventory - Writing job specification - HR and theresponsive organisation.

Recruitment and selection process : Employment planning and forecasting - Building employeecommitment : Promotion from within - Sources, Developing and Using application forms - IT andrecruiting on the internet.

Employee Testing & selection : Selection process, basic testing concepts, types of test, work samples& simulation, selection techniques, interview, common interviewing mistakes, Designing & conductingthe effective interview, small business applications, computer aided interview.

UNIT III: Training & Development

Orientation & Training: Orienting the employees, the training process, need analysis, Trainingtechniques, special purpose training, Training via the internet.

Developing Managers: Management Development - The responsive managers - On-the-job and off-the-job Development techniques using HR to build a responsive organisation. ManagementDevelopments and CD-Roms - Key factor for success.

Performance appraisal: Methods - Problem and solutions - MBO approach - The appraisal interviews- Performance appraisal in practice.

Managing careers: Career planning and development - Managing promotions and transfers.

UNIT IV: Compensation & Managing Quality

Establishing Pay plans : Basics of compensation - factors determining pay rate - Current trends incompensation - Job evaluation - pricing managerial and professional jobs - Computerised job evaluation.

Pay for performance and Financial incentives : Money and motivation - incentives for operationsemployees and executives - Organisation wide incentive plans - Practices in Indian organisations.

Benefits and services : Statutory benefits - non-statutory (voluntary) benefits - Insurance benefits -retirement benefits and other welfare measures to build employee commitment.

UNIT V: Labour relations and employee security

Industrial relation and collective bargaining : Trade unions - Collective bargaining - future of tradeunionism. Discipline administration - grievances handling - managing dismissals and separation.

Labour Welfare : Importance & Implications of labour legislations - Employee health - Auditing HRfunctions, Future of HRM function.

Unit-I

LESSON

1HUMAN RESOURCE FUNCTION

CONTENTS

1.0 Aims and Objectives

1.1 Introduction

1.2 Human Resource Philosophy

1.2.1 Scope of HRM

1.2.2 Objectives of HRM

1.3 Changing Environments of HRM

1.3.1 Growth in India

1.4 Strategic Human Resource Management

1.5 Using HRM to Attain Competitive Advantage

1.6 Let us Sum Up

1.7 Lesson-end Activity

1.8 Keywords

1.9 Questions for Discussion

1.10 Suggested Readings

1.0 AIMS AND OBJECTIVES

In this lesson we shall discuss about human resource function. After going through thislesson you will be able to:

(i) Discuss human resource philosophy and changing environments of HRM.

(ii) Understand strategic human resource management and trends in HRM.

(iii) Analyse organisation of HR Department, line and staff functions and role of HRmanagers.

1.1 INTRODUCTION

Functions of HRD practices in an organisation should be to put efforts to develop andrealise the full potential of the workforce, including management and to maintain anenvironment conducive to total participation, quality leadership and personal andorganisational growth. In an organisation, there are six units which are concerned withHRD, namely person, role, dyad, team, inter-team and organisation. The effectivenessof one contributes in turn to the effectiveness of the others.

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Human Resource Management 1.2 HUMAN RESOURCE PHILOSOPHY

Human Resource Management is a process of bringing people and organisations togetherso that the goals of each are met. It tries to secure the best from people by winning theirwholehearted cooperation. In short, it may be defined as the art of procuring, developingand maintaining competent workforce to achieve the goals of an organisation in an effectiveand efficient manner. It has the following features:

i. Pervasive force: HRM is pervasive in nature. It is present in all enterprises. Itpermeates all levels of management in an organisation.

ii. Action oriented: HRM focuses attention on action, rather than on record keeping,written procedures or rules. The problems of employees at work are solved throughrational policies.

iii. Individually oriented: It tries to help employees develop their potential fully. Itencourages them to give their best to the organisation. It motivates employeesthrough a systematic process of recruitment, selection, training and developmentcoupled with fair wage policies.

iv. People oriented: HRM is all about people at work, both as individuals and groups.It tries to put people on assigned jobs in order to produce good results. The resultantgains are used to reward people and motivate them toward further improvementsin productivity.

v. Future-oriented: Effective HRM helps an organisation meet its goals in the futureby providing for competent and well-motivated employees.

vi. Development oriented: HRM intends to develop the full potential of employees.The reward structure is tuned to the needs of employees. Training is offered tosharpen and improve their skills. Employees are rotated on various jobs so thatthey gain experience and exposure. Every attempt is made to use their talents fullyin the service of organisational goals.

vii. Integrating mechanism: HRM tries to build and maintain cordial relations betweenpeople working at various levels in the organisation. In short, it tries to integratehuman assets in the best possible manner in the service of an organisation.

viii. Comprehensive function: HRM is, to some extent, concerned with anyorganisational decision which has an impact on the workforce or the potentialworkforce. The term ‘workforce’ signifies people working at various levels, includingworkers, supervisors, middle and top managers. It is concerned with managingpeople at work. It covers all types of personnel. Personnel work may take differentshapes and forms at each level in the organisational hierarchy but the basic objectiveof achieving organisational effectiveness through effective and efficient utilisationof human resources, remains the same. “It is basically a method of developingpotentialities of employees so that they get maximum satisfaction out of their workand give their best efforts to the organisation”. (Pigors and Myers)

ix. Auxiliary service: HR departments exist to assist and advise the line or operatingmanagers to do their personnel work more effectively. HR manager is a specialistadvisor. It is a staff function.

x. Inter-disciplinary function: HRM is a multi-disciplinary activity, utilising knowledgeand inputs drawn from psychology, sociology, anthropology, economics, etc. To

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Human Resource Functionunravel the mystery surrounding the human brain, managers, need to understandand appreciate the contributions of all such ‘soft’ disciplines.

xi. Continuous function: According to Terry, HRM is not a one shot deal. It cannotbe practised only one hour each day or one day a week. It requires a constantalertness and awareness of human relations and their importance in every dayoperations.

1.2.1 Scope of HRM

The scope of HRM is very wide. Research in behavioural sciences, new trends inmanaging knowledge workers and advances in the field of training have expanded thescope of HR function in recent years. The Indian Institute of Personnel Managementhas specified the scope of HRM thus:

i. Personnel aspect: This is concerned with manpower planning, recruitment,selection, placement, transfer, promotion, training and development, lay off andretrenchment, remuneration, incentives, productivity, etc.

ii. Welfare aspect: It deals with working conditions and amenities such as canteens,creches, rest and lunch rooms, housing, transport, medical assistance, education,health and safety, recreation facilities, etc.

iii. Industrial relations aspect: This covers union-management relations, jointconsultation, collective bargaining, grievance and disciplinary procedures, settlementof disputes, etc.

1.2.2 Objectives of HRM

The principal objectives of HRM may be listed thus:

i. To help the organisation reach its goals: HR department, like other departmentsin an organisation, exists to achieve the goals of the organisation first and if it doesnot meet this purpose, HR department (or for that matter any other unit) will witherand die.

ii. To employ the skills and abilities of the workforce efficiently: The primarypurpose of HRM is to make people’s strengths productive and to benefit customers,stockholders and employees.

iii. To provide the organisation with well-trained and well-motivated employees:HRM requires that employees be motivated to exert their maximum efforts, thattheir performance be evaluated properly for results and that they be remuneratedon the basis of their contributions to the organisation.

iv. To increase to the fullest the employee’s job satisfaction and self-actualisation: Ittries to prompt and stimulate every employee to realise his potential. To this end suitableprogrammes have to be designed aimed at improving the quality of work life (QWL).

v. To develop and maintain a quality of work life: It makes employment in theorganisation a desirable, personal and social, situation. Without improvement in thequality of work life, it is difficult to improve organisational performance.

vi. To communicate HR policies to all employees: It is the responsibility of HRM tocommunicate in the fullest possible sense; tapping ideas, opinions and feelings ofcustomers, non-customers, regulators and other external public as well asunderstanding the views of internal human resources.

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Human Resource Management vii. To be ethically and socially responsive to the needs of society: HRM mustensure that organisations manage human resource in an ethical and sociallyresponsible manner through ensuring compliance with legal and ethical standards.

Check Your Progress

1. Human Resource Management is the process of bringing people andorganisation together. Justify the statement.

2. How can you say that HRM is a multi-disciplinary activity?

1.3 CHANGING ENVIRONMENTS OF HRM

The early part of the century saw a concern for improved efficiency through carefuldesign of work. During the middle part of the century emphasis shifted to the availabilityof managerial personnel and employee productivity. Recent decades have focused onthe demand for technical personnel, responses to new legislation and governmentalregulations, increased concern for the quality of working life, total quality managementand a renewed emphasis on productivity. Let us look into these trends more closely byexamining the transformation of personnel function from one stage to another in achronological sequence:

Box 1.1

Concept What is it all about?

The Commodity concept Labour was regarded as a commodity to be bought and sold.Wag es were based on demand and supply. Governmentdid very little to protect workers.

The Factor of Production concept Labour is like any other factor of production, viz, money,materials, land, etc. Workers are like machine tools.

The Goodwill concept Welfare measures like safety, first aid, lunch room, rest roomwill have a positive impact on workers’ productivity

The Paternalistic concept/ Management must assume a fatherly and protective attitudePaternalism employees. towards Paternalism does not mean merely providing benefits

but it means satisfying various needs of the employees asparents meet the requirements of the children.

The Humanitarian concept To improve productivity, physical, social and psychologicalneeds of workers must be met. As Mayo and others stated,money is less a factor in determining output, than groupstandards, group incentives and security. The organisationis a social system that has both economic and socialdimensions.

The Human Resource concept Employees are the most valuable assets of an organisation.There should be a conscious effort to realise organisationalgoals by satisfying needs and aspirations of employees.

The Emerging concept Employees should be accepted as partners in the progressof a company. They should have a feeling that the organisationis their own. To this end, managers must offer better qualityof working life and offer opportunities to people to exploittheir potential fully. The focus should be on Human ResourceDevelopment.

1.3.1 Growth in India

Early phase: Though it is said that P/HRM a discipline is of recent growth, it has had itsorigin dating back to 1800 B.C. For example: the minimum wage rate and incentivewage plans were included in the Babylonian Code of Hammurabi around 1800 B.C. The

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Human Resource FunctionChinese, as early as 1650 B.C. had originated the principle of division of labour and theyunderstood labour turnover even in 400 B.C. The span of management and relatedconcepts of organisation were well understood by Moses around 1250 B.C. and theChaldeans had incentive wage plans around 400 B.C. Kautilya, in India (in his bookArthasastra) made reference to various concepts like job analysis, selection procedures,executive development, incentive system and performance appraisal.

Legal phase: The early roots of HRM in India could be traced back to the period after1920. The Royal commission on labour in 1931 suggested the appointment of labour officerto protect workers’ interests and act as a spokesperson of labour. After Independence,The Factories Act 1948, made it obligatory for factories employing 500 or more workers.

Box 1.2

The model rules framed under the Factories Act, 1948, which was the pioneering legislation toprovide for the appointment of Welfare Officers, had laid down a chart of responsibilities for them.These responsibilities are:

1. Supervision of

(a) Safety, health and welfare programmes; such as housing, recreation, sanitation servicesas provided under law or otherwise.

(b) Working of joint committees,

(c) Grant of leave with wages as provided and

(d) Redressal of workers’ grievances

2. Counselling workers in

(a) Personal and family problems,

(b) Adjusting to the work environment and

(c) Understanding rights and privileges

3. Advising the management in

(a) Formulating labour and welfare policies,

(b) Apprenticeship-training programmes,

(c) Meeting the statutory obligation to workers,

(d) Developing fringe benefits and

(e) Workers’ education and the use of communication media.

4. Liaison

(a) With workers so as to

(i) Understand various limitations under which they work,

(ii) Appreciate the need for harmonious industrial relations in the plant,

(iii) Interpret company policies to workers and

(iv) Persuade them to come to a settlement in case of a dispute.

(b) With the management so as to

(i) Appreciate the workers’ viewpoints in various matters in the plant,

(ii) Intervene on behalf of the workers in matters under consideration of themanagement,

(iii) Help different departmental heads to meet their obligations under the Act,

(iv) Maintain harmonious industrial relations in the plant and

(v) Suggest measures for promoting the general well-being of workers.

(c) With workers and the management so as to

(i) Maintain harmonious industrial relations in the plant,

Contd...

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Human Resource Management (ii) Have the way for prompt redressal of grievances and the quick settlementof disputes and

(iii) Improve the productive efficiency of the enterprise.

(d) with outside agencies, such as

(i) Factory inspectors, medical officers and other inspectors for securing thepeople by enforcement of various acts as applicable to the plant and

(ii) Other agencies in the community, with a view to helping workers to makeused of community services.

“In view of legal compulsions and the enumeration of duties the entire approach oforganisations toward their personnel was to comply with the laws and keep the welfareofficers busy with routine functions” Meanwhile two professional bodies, viz., the IndianInstitute of Personnel Management (IIPM) Kolkata and the National Institute of LabourManagement (NILM) Mumbai have come into existence in 1950s.

Welfare phase: During the 1960s the scope of personnel function has expanded a bit,covering labour welfare, participative management, industrial harmony, etc. “In this period,the human relations movement of the West had also had its impact on Indian organisations”.The legalistic preoccupations slowly gave way to harmonious industrial relations andgood HR practices.

Development phase: In 1960s and 70s the HR professionals focused more ondevelopmental aspects of human resources. The emphasis was on striking a harmoniousbalance between employee demands and organisational requirements. HRD has cometo occupy a centre stage and a focal point of discussion in seminars, conferences andacademic meets. The two professional bodies, IIPM and NILM, were merged to formthe National Institute of Personnel Management (NIPM) at Kolkata.

The following tables capture the picture more accurately:

Box 1.3

Period Emphasis Status Roles

1920 – 30 Welfare management Clerical l Welfare administrator

Paternalistic practices l Policeman

1940 – 60 Expanding the role to cover Administrative l Appraiser

Labour, Welfare, Industrial l Advisor

Relations and Personnel l Mediator

Administration l Legal advisor

l Fire fighting

1970 – 80 Efficiency, effectiveness Developmental l Change agent

dimensions added l Integrator

Emphasis on human l Trainer

values, aspirations, l Educator

dignity, usefulness

1990s – Incremental productivity Proactive, l Developer

onwards gains through human growth-oriented l Counsellor

assets l Coach

l Mentor

l Problem solver

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Human Resource FunctionDuring the 1990's, organisational restructuring and cost cutting efforts have started in abig way-thanks to the pressures of liberalisation, privatisation and globalisation (LPGera) forcing companies to focus attention on employee capabilities product/service quality,speedy response, customer satisfaction etc. Changing demographics and increasingshortages of workers with the requisite knowledge, skills and ability have grown inimportance. The issue of workforce diversity has assumed greater importance-in viewof the cultural, religious social, regional backgrounds of workers, especially in globalsized companies such as Reliance, Ranbaxy, Asian Paints, TISCO, etc.

1.4 STRATEGIC HUMAN RESOURCE MANAGEMENT

SHRM is the pattern of planned human resource developments and activities intended toenable an organisation to achieve its goals (Wright and McMahan). This means acceptingthe HR function as a strategic partner in both the formulation of the company’s strategic,as well as in the implementation of those activities through HR activities. While formulatingthe strategic plan HR management can play a vital role, especially in identifying andanalysing external threats and opportunities. (Environmental scanning) that may be crucialto the company's success. HR management can also offer competitive intelligence (likenew incentive plans being used by competitors, data regarding customer complaintsetc.) that may be helpful while giving shape to strategic plans. HR function can alsothrow light on company's internal strengths and weaknesses. For example, IBM's decisionto buy Lotus was probably prompted in part by IBM's conclusion that its own humanresources were inadequate for the firm to reposition itself as an industry leader innetworking systems (Dessler). Some firms even develop their strategies based on theirown HR- based competitive advantage. Software Majors, Wipro, TCS have not sloweddown their recruitment efforts during the lean periods, pinning hopes on their ownexceptionally talented employee teams. In fact they have built their strategic and operatingplans around outsourcing sourcing contracts from US, Europe, Japan and Germany-which would help them exploit the capabilities of their employees fully.

HR has a great role to play in the execution of strategies. For example, HDFC'scompetitive strategy is to differentiate itself from its competitors by offering superiorcustomer service at attractive rates (searching the right property, finishing legal formalities,offering expert advice while negotiating the deal, competitive lending rates, fast processingof applications, offering other financial products of HDFC at concessional rates, door-to-door service as per customers’ choice etc. (HDFC's growth architecture, BusinessToday, Jan 6, 2001). Since the same basic services are offered by HDFC's competitorssuch as LIC Housing Finance GIC Housing Finance, banks and private sector, playerslike Dewan Housing Finance, Ganesh Housing, Live Well Home, Peerless Abassan etc.HDFC's workforce offers a crucial competitive advantage (highly committed, competentand customer-oriented workforce). HR can help strategy implementation in other ways.It can help the firm carry out restructuring and downsizing efforts without rubbingemployees on the wrong side- say, through outplacing employees, linking rewards toperformance, reducing welfare costs, and retraining employees. HR can also initiatesystematic efforts to enhance skill levels of employees so that the firm can compete onquality.

Globalisation, deregulation and technological innovation have- in recent times- createdthe need for rather, faster and more competitive organisations. Under the circumstances,employee behaviour and performance is often seen as the best bet to push competitorsto a corner and enhance productivity and market share. HR practices buildcompetitiveness because they allow for strategic implementation, create a capacity forchange and instil strategic unity.

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Human Resource Management 1.5 USING HRM TO ATTAIN COMPETITIVEADVANTAGE

Competitive advantage refers to the ability of an organisation to formulate strategies toexploit rewarding opportunities, thereby maximising its return on investment. Competitiveadvantage occurs if customers perceive that they receive value from their transactionwith an organisation. This requires single-minded focus on customer needs andexpectations. To achieve this, the organisation needs to tune its policies in line withchanging customer's requirements. The second principle of competitive advantage derivesfrom offering a product or service that your competitor cannot easily imitate or copy. Anorganisation should always try to be unique in its industry along dimensions that arewidely valued by customers. For example Apple stresses its computers’ usability,Mercedes Benz stresses reliability and quality; Maruti emphasises affordability of itslower-end car Maruti 800. In order to enjoy the competitive advantage, the firm shouldbe a cost-leader, delivering value for money. It must have a committed and competentworkforce. Workers are most productive if (i) they are loyal to the company, informedabout its mission, strategic and current levels of success, (ii) involved in teams whichcollectively decide how things are to be done and (iii) are trusted to take the right decisionsrather than be controlled at every stage by managers above them (Thompson). A goodteam of competent and committed employees will deliver the goals if the are involved inall important activities and are encouraged to develop goals that they are supposed toachieve. In recent years, a new line of thinking has emerged to support this view-knownas strategic human resources management (SHRM).

1.6 LET US SUM UP

Human Resource Management may be defined as the art of procuring, developing andmaintaining competent workforce to achieve the goals of an organisation in an effectiveand efficient manner. The Indian Institute of Personnel Management has specified thescope of HRM as Personnel aspect, Welfare aspect, Industrial relations aspect.The principal objectives of HRM include to help the organisation reach its goals, toemploy the skills and abilities of the workforce efficiently. HR has a great role to play inthe execution of strategies. HR can help strategy implementation in other ways. It canhelp the firm carry out restructuring and downsizing efforts without rubbing employeeson the wrong side- say, through outplacing employees, linking rewards to performance,reducing welfare costs, and retraining employees.

1.7 LESSON-END ACTIVITY

Arrange yourself in small groups of four or five students and compare and contrast thedifferences among the organisations you investigated. Can you isolate any factors thatappear to influence how an organisation perceives the value of its employees?

1.8 KEYWORDS

Suspension

Advising

Liasion

Globalisation

Deregulation

Technological innovation

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Human Resource FunctionProductivity

Rewards

Recruitment

1.9 QUESTIONS FOR DISCUSSION

1. Define HR philosophy.

2. Discuss scope of HRM.

3. What are the objectives of HRM?

4. What are the various aspects of changing environment of HRM?

1.10 SUGGESTED READINGS

Gary Dessler, “Human Resource Management”, Seventh edition, Prentice-Hall of IndiaP. Ltd., Pearson.

David A. DeCenzo & Stephen P. Robbins, Personnel/Human Resource Management,Third edition, PHI/Pearson.

VSP Rao, Human Resource Management: Text and cases, First edition, Excel Books,New Delhi-2000.

Dr. R. Venkatapathy & Assissi Menacheri, Industrial Relations & Labour Welfare,Adithya Publications, CBE, 2001.

Robert L. Gibson and Marianne H. Mitchell, Introduction to Counselling andGuidance, VI edition, PHI, 2005.

PL Rao, Comprehensive Human Resource Management, Excel Books, New Delhi.

LESSON

2TRENDS IN HRM

CONTENTS


2.1 Introduction

2.2 Future of HRM: Influencing Factors

2.3 Organisation of HRM Department

2.3.1 HRM Department in Line Organisation

2.3.2 HRM Department in Functional Organisation

2.3.3 HRM Department in Line and Staff Organisation

2.3.4 HRM Department in a Divisionalised Organisational Structure

2.3.5 HRM Department in a Matrix Organisational Structure

2.4 Let us Sum Up


2.6 Keywords




In this lesson we shall discuss about trends in HRM. After studying this you will be ableto:

(i) Understand future of HRM and using HRM to attain competitive advantage.

(ii) Analyse organisation of HRM department.

2.1 INTRODUCTION

Traditionally, the personnel function centred around control and direction of employeesfor achievement of predetermined goals. The Human Resources Approach, in directcontrast to this, recognises the worth of human being in the realisation of corporategoals. It takes a supportive and developmental route to achieve results through thecooperative efforts of employees. When opportunities for growth and enhancement ofskills are available, people will be stimulated to give their best, leading to greater jobsatisfaction and organisational effectiveness. The manager’s role, too, has undergone adramatic change over the years. From control and direction of employees, he is expectedto move toward clarifying goals and paths and creating a supportive and growth oriented

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Trends in HRMenvironment, where people are willing to take up assigned roles willingly andenthusiastically. The effective use of people is the most critical factor in the successfulaccomplishment of corporate goals. To be effective, therefore, Human Resourcemanagers need to understand the needs, aspirations, concerns of employees proactively,face the challenges head-on and resolve issues amicably. They are expected tosuccessfully evolve an appropriate corporate culture, take a strategic approach to theacquisition, motivation and development of human resources and introduce programmesthat reflect and support the core values of the organisation and its people. This is easiersaid than done in view of constant changes in environment characterised by the followingthings:

2.2 FUTURE OF HRM: INFLUENCING FACTORS

1. Size of workforce: Corporates have grown in size considerably in recent years,thanks to global competition in almost all fields. The size of the work force,consequently, has increased, throwing up additional challenges before HR managersin the form of additional demands for better pay, benefits and working conditionsfrom various sections of the workforce constantly.

2. Composition of workforce: The workforce composition is also changing over theyears. The rising percentage of women and minorities in the work force is going toalter workplace equations dramatically. Demands for equal pay for equal work,putting an end to gender inequality and bias in certain occupations, the breakingdown of grass ceiling have already been met. Constitutional protection ensured tominorities has also been met to a large extent by HR managers in public sectorunits. The new equations may compel HR managers to pay more attention toprotecting the rights of the other sex and ensure statutory protection and concessionsto minorities and disadvantaged sections of society. The shifting character ofworkforce in terms of age, sex, religion, region, caste etc. is going to put pressureson HR managers trying to integrate the efforts of people from various places.Managing heterogeneous and culturally diverse groups is going to stretch the talentsof HR managers fully.

3. Employee expectations: “Instead of attempting to force employees to conform toa ‘corporate mould’ future managers may well have to make more allowances forindividual differences in people”. (Mathis and Jackson p. 616). Nowadays workersare better educated, more demanding and are ready to voice strong, violent andjoint protests in case their expectations are not met. The list of financial and non-financial demands is ever-growing and expanding. In fast-changing industries suchas software, telecom, entertainment and pharmaceuticals the turnover ratios arerising fast and if HR managers do not respond positively to employee expectations,the acquisition and development costs of recruits is going to mount up steadily. Anefficient organisation is, therefore required to anticipate and manage turnover throughhuman resource planning, training schemes followed by appropriate compensationpackages.

4. Changes in technology: Increased automation, modernisation and computerisationhave changed the way the traditional jobs are handled. In such a scenario unlessemployees update their knowledge and skills constantly, they cannot survive andgrow. This will necessitate training, retraining and mid-career training of operativesand executives at various levels. Where such initiatives are missing, it becomesvery difficult for employees to face the forces of technology with confidence andget ahead in their careers steadily.

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Human Resource Management Box 2.1: HR and Technology

As we all know, the workspot of 2000 is significantly different from its counterpart in early70s, chiefly because of computerisation. The invention and development of microchips hasbrought a dramatic revolution in workplace. Microchips are tiny components of electricalcircuits which can be combined to form much larger and more complex electronic systems.They have made it possible to build such systems simply and cheaply at only tiny fractionof the weight and size that would formerly have been required. Industrial robots have begunto invade the assembly line in a big way-doing such tasks as welding, spray-painting, precisioncutting or even playing snooker. Many cars are now fitted with on-board computers, especiallyin the developed world, that diagnose problems in seconds that used to take hours formechanics. IBM has built a plant in Austin, Texas that can produce laptop computerswithout the help of a single worker. If you look at the banking industry, automated tellermachines, for example, have replaced thousands of human tellers in banks. The impact ofnew technology on the total number of jobs available has been quite devastating. It has placedpower in the hands of a small group of elite people in most large scale organisations. This hastaken place because of deskilling of most jobs, where a few individuals tend to control theorganisations through the increased availability of information. Lower and middle level positionsare the worst hit in this scenario, because computers do the compilation and processing ofinformation now. Work roles have also become more integrated. New technologies generallycompel people to learn a new set of skills altogether and also learn to work together in projectteams time and again.

In the present day world, information is the key resource. Organisations that employappropriate technologies (to get the right information to the right people at the right time)will enjoy a competitive advantage. The only way to survive in an environment marked byconstant changes is to convert the firm into a kind of learning organisation. A learningorganisation encourages people to learn to produce the results they desire, nurtures creativeand innovative patterns of collective learning and develops fresh organisational capabilitiesall the time.

5. Life-style changes: The life-style patterns of employees have undergone a rapidchange in recent times. Unlike their predecessors people are now ready to changejobs, shift to new locations, take up jobs in start-up companies instead ofmanufacturing units and even experiment with untested ideas. A recent survey ofyoung executives in four major metros (Chennai, Bombay, Bangalore and Delhi)(Business line, Urban pulse, Feb 2000) in India revealed several interesting things:

Box 2.2

Factor Aspirations, preferences, attitudes, claims

Working Hours Work for a little more than 8½ hours a day. None of the respondentsspend weekends at traditional hang-outs such as discos and pubs

About choosing a job Freshers wanted to jump jobs quickly; for them compensationwas an important factor while choosing a job but as one progressedto higher levels compensation was replaced by factors such as jobsatisfaction, responsibilities etc., 30 to 40 per cent of youngpeople grabbed the first job offer and changed jobs after acquiringsome experience. Other important factors in valuing a job weretype of organisation, benefits, pressure in job, working loans,training opportunities, work atmosphere etc.

Job Satisfaction Awareness of global packages and practices made young executiveslook for high paying jobs, jobs that do not pay well aredissatisfying. Other factors determining satisfaction levels were:well established company, informal work atmosphere, trainingopportunities, flexible working hours, travel abroad, designation,job content etc.

Career goals Making it big some day and going places in their careers. Mostseem to have achieved their career goals.

Corporate Icons Majority of young executives (55%) had no role model; othershad role models like Bill Gates, Dhirubhai Ambani, JRD Tata etc.

Preferred Industry Information Technology, Advertising, Finance, Managementconsultancy, FMCG companies, Auto, Hospitality in that order.

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Trends in HRMUnlike the western world where dual careers are quite common, HR managers inIndia have not faced any additional challenges in the form of relocation efforts, jobsharing and job hunting exercises etc. The situation, however, may change in thenext couple of years especially in software, media, telecom sectors where thenumber of women employees is rising steadily.

The survey of young executives underlined the importance of designing jobs aroundthe individual, taking his career expectations into account. Flexible working hours,attractive compensation packages, job content and growth opportunities etc. mayoccupy the centre-stage in HR strategies of Indian managers in the days ahead.

6. Environmental challenges: Privatisation efforts in India are likely to gathermomentum in the coming years, as most public sector units face survival problems.(For example Air India has 750 employees per aircraft, which makes it the mostover-staffed airline in the world. Air India’s cost per employee is over Rs 5 lakh ayear, perhaps highest among Indian public sector units. Likewise, Delhi TransportCorporation has 30,000 employees, of which 15,000 are excess and the annualexpenditure on this excess staff works out to Rs 22 crore!) Mounting costs, risingwage bills, increased competition, inefficient operations, outdated technology, debtburden etc. will compel many public sector units to either draw the shutters downor seek private sector partners. The burden if training and retraining employeeswith a view to make them more productive and useful under the new set-up isgoing to fall on the shoulders of HR managers. With this the legal stipulationscovering recruitment and selection of employees, employment of reserved categoryemployees, minorities etc. are also likely to lose their importance over a period oftime.

7. Personnel function in future: The personnel function in future is going to evolvethus:

i. Job redesign: The focus on job redesign will increase: Flexitime, job sharingand alternative work arrangements will come to occupy a centre-stage.

ii. Career opportunities: Apart from compensation, personal growth and self-development may become primary motives for working. HR managers mayhave to restructure work so that employees may find expression of theirneeds for creativity, autonomy and entrepreneurship (For example NIIT hasalready started the Netpreneur scheme in 2000 to encourage budding netconsultants – either from its own ranks or outside) in their jobs.

iii. Productivity: “Productivity, efficiency, growth” are going to be the newmantras for corporate survival and growth.

iv. Recruitment and selection: Effective selection devices are likely to be used,giving premium to employee skills, knowledge, experience, ability to get alongwith people etc.

v. Training and development: As technologies change rapidly, people need toupdate their skills continuously. A much broader range of abilities is requiredto keep pace with ever-present changes, forcing companies to spendincreasing sums on training and development. (For instance pharmaceuticalmajors like Dr Reddy Labs, Ranbaxy, Cipla, Sun Pharma have increasedtheir Research and Development budgets in response to WTO conditionalitiesin recent years).

vi. Rewards: Rewards will be tied to performance. Benefits will accrue to thosewho show merit. Individually – designed packages recognising talent mayout-number group compensation plans. Carrot and stick policies may not finda place in the new corporate lexicon in the days ahead.

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Human Resource Management vii. Safety and welfare: Increasing investments may have to be made bycompanies to improve the work atmosphere, climate and job satisfaction levelsof employees.

8. Changes in 21st century impacting HRM: Some of the current trends that wouldhave a significant impact on the way HR practices would get transformed in futuremay be listed thus:

i. HR as a spacing board for success: Executives with people managementskills would be able to steal the show, since they help integrate corporategoals with employee expectations in a successful way. Senior HR executiveswould be able to smoothly move into top management positions, using theirsoft skills to good advantage.

ii. Talent hunting, developing and retaining: Clear focus areas: The 21stcentury corporation would be looking for people with cross-functional expertisestrong academic background and team management skills. The new recruitsare is expected to utilise the scarce resources judiciously and produce excellentresults- in line with the expectations of internal as well as external groups. Ascompanies realise the importance of human element in gaining a sustainablecompetitive advantage, there would be a mad scramble for 'talent'. This wouldin turn, compel corporate houses to pay close attention to talent acquisitiondevelopment and retention through novel developmental efforts compensationpackages and incentive schemes apart from flexible working schedules. Moreand more workers would be able to process information by working at homes,forcing companies to evaluate each employee’s contribution carefully andpay accordingly.

iii. Lean and mean organisations: Organisations will be forced to eliminatelow-end job, say good-bye to older employees with limited skill-sets, out sourcework to specialised institutions in an attempt to save costs and remain highlycompetitive. As a result lay offs would occur and unemployment rates will goup; large outlays of cash may be required while buying out older employeesand obtaining employee loyalty and commitment would be quite challengingin such a scenario.

iv. Labour relations: Deregulation, privatisation, global competition and the likewould in a way, mean the end of the road for trade unions. They will lose theircount slowly but steadily. The political support enjoyed by them hitherto wouldalso come down drastically. Economic compulsions would make both theemployers and employees realise the folly of pulling down shutters or goingon strike, however genuine the cause might be. Governmental influence inlabour-management relations would have only historical significance asemployment-related issues begin to be dictated by market forces.

v. Health care benefits: To attract talented workforce healthier workenvironments would be an absolute necessity. Employees would be obliged togive their employees safe, healthy and secure work environments. Wellnessprogrammes also need to be designed to help employees identify potentialhealth risks and deal with them before they become problems. Moreimportantly, organisations need to pay more attention to issues such as officedecor, furniture design, space utilisation with a view to improve the comfortlevels of employees.

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Trends in HRMCheck Your Progress

1. What is the emerging concept of changing environment of HRM?

2. Match the following:

(a) Suspension (i) Developing fringe benefits

(b) Counselling (ii) Rights & privileges

(c) Advising (iii) Safety, Health and Welfare programmes

(d) Liasion (iv) Interpret company policies

2.3 ORGANISATION OF HRM DEPARTMENT

The internal structure of a HRM or personnel department depends on various factorssuch as nature and size of the organisation, managerial preference to structure operationsclearly, external forces etc. Small firms have only a single section, headed by a personnelofficer taking care of everything. Medium sized firms may create a separate personneldepartment having experts in the personnel field supported by administrative staff. Inlarge firms the structure of a personnel department may take various shapes, dependingon organisational resources, competitive pressures and total employee strength. Let usexamine this in - greater detail.

2.3.1 HRM Department in Line Organisation

Line structure is more common in small firms. In this structure authority flows in a directline from supervisors to subordinates. Each employee knows who his superior is andwho has the authority to issue orders. Managers have full authority (line authority) intheir areas of operation and are responsible for final results. Line authority implies theright to give orders and to have decisions implemented. The “one-man- one-boss” principleis observed strictly. Authority relationships are clear and there is strict discipline aspersons working at lower levels can have access to higher level officers only throughtheir immediate bosses.

2.3.2 HRM Department in Functional Organisation

In any functional organisation, all activates of an organisation are divided into variousfunctions such as production, marketing, finance etc. Each functional area is headed bya specialist who directs the activities of that area for the entire organisation. Everyemployee, therefore, is required to report to various functional heads. The functionalhead has line authority over subordinates in his own functional area. Additionally, he hasfunctional authority over activities in other functional areas. The term 'functional authority'thus is a limited from of line authority given to functional experts in an area wherecertain specialised activities are carried out under the normal supervision of managersbelonging to other departments.

Functional organisation has the great advantage of clarity. Every body has a home. Itprovides economy of scale within functions. It reduces duplication and waste. Functionalheads can specialise and focus energies on a narrow area as they gain experience,expertise and competence over a period of time. The ‘effort focus’, however, putsmanagers in a race. They tend to fight for power, resources and benefits. Every onetries to glorify his own field at the cost of others. Overlapping of authority and dividedresponsibility further complicates the scenario.

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Human Resource Management 2.3.3 HRM Department in Line and Staff Organisation

The line and staff structure combines the benefits of both line organisation and functionalorganisation. Staff positions are created to assist line managers. Thus the personneldepartment offers help and advice on personnel issues to all departments without violatingthe unity of command principle.

2.3.4 HRM Department in a Divisionalised Organisational Structure

The role of a personnel manager attached to the divisional office/branch office or factoryof a decentralised organisation is particularly a difficult one. The Personnel manager atdivisional/branch level is responsible to the local divisional/branch manager in a line senseand subordinate to the Manager-Personnel at head office in a staff or functional sense.Personnel manager at divisional/branch level has to help the divisional/branch managerin developing personnel programmes and in the management of personnel of the division/branch concerned. The deputy manager personnel at the divisional level may contact themanager-personnel at the head office to gain acceptance of the personnel programmes.In case of rift between divisional manager and deputy manager, they may report theirdifficulties to their common superior who in turn consults higher management for correctdecision. Similarly, the personnel officer at branch level may contact the deputy divisionalmanager-personnel at divisional level to gain acceptance of the personnel programmesand to get clarifications about personnel issues. In case of the rift between the branchmanager and branch personnel officer, they may report their issues to their superior atdivisional level. The branch personnel officer and branch manager may get the assistancefrom the personnel manager at the head office, in solving the problems of crucial andstrategic nature as also those which cannot be solved at the branch/divisional level.

2.3.5 HRM Department in a Matrix Organisational Structure

In a matrix organisational structure, employees have two superiors, in that they areunder dual authority. One chain of command is functional and the other is a project team.Hence, matrix structure is referred to as a multi-command system (both vertical andhorizontal dimension). Thus, the team of employees which comprise the personneldepartment have two superiors, i.e., Personnel manager (vertical dimension) and Projectmanager horizontal dimension. Both dimensions of structure are permanent and balanced,with power held equally by both the functional head and a project manager.

2.4 LET US SUM UP

The role of HRM has undergone a dramatic change over the years. From control anddirection of employees, HR department is expected to move toward clarifying goals andpaths and creating a supportive and growth oriented environment. We have also discussedfactors influencing future of HRM , emerging trends in 21st century affecting HRM anddifferent types of organisation of HR department.


In small groups find out the trends relating to technology and diversity that have significantbearing on the way businesses are managed in the 21st century. What challenges dothese trends present? What initiatives have been taken by modern businesses to meetthese challenges?

2.6 KEYWORDS

Health care benefits

Planning

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Trends in HRMControlling

Directing

Original

Job design


1. What are the different influencing factors considering the future of HRM?

2. What are the differences between Managerial functions and Operative functions?

3. “The challenge and the role of HR Department being what it is, it is strange that isstatus is not recognised and respected.” Comment.

4. In what ways can effective HR contribute to benefits?








LESSON

3LINE AND STAFF FUNCTIONS

CONTENTS


3.1 Introduction

3.2 Description of Line and Staff Functions

3.2.1 Managerial Functions

3.2.2 Operative Functions

3.3 Role of HR Managers

3.3.1 Administrative Roles

3.3.2 Operational Roles

3.3.3 Strategic Roles

3.4 Let us Sum Up


3.6 Keywords




In this lesson we shall discuss about line and staff functions. After going through thislesson you will be able to:

(i) Understand description of line and staff function.

(ii) Analyse the role of HR managers.

3.1 INTRODUCTION

For any dynamic and growth-oriented organisation to survive in a fast-changingenvironment, HRD activities play a very crucial role. Recent economic restructuring inIndia at the macro level influenced the need for production restructuring at unit level andproduction restructuring necessitated labour restructuring vis-a-vis restructuring of HRDactivities in organisations. The primary goal of HR manager is to increase a worker’sproductivity and a firm’s profitability as investment in HRD improves a worker’s skilland enhances motivation. The other goal of HR manager is to prevent obsolescence atall levels.

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Line and Staff Functions3.2 DESCRIPTION OF LINE AND STAFF FUNCTIONS

In a sense, all managers are HR managers as they all get involved in activities likeselecting, training, compensating employees. Yet most firms, now a days, have the HRdepartment headed by a person with requisite qualifications in behavioural sciences.How do the duties of this HR manager relate to the line managers’ HR duties would bean interesting question to answer. Line managers have the final responsibility for achievingthe organisation's goals. They also have the authority to direct the work of subordinates.Staff managers usually help and advise line managers in achieving organisational goals.HR managers are staff experts. They assist line managers in areas like recruiting,selecting, training and compensating. Managing people, in a broader context, is everymanager’s business and successful organisations generally combine the experience ofline managers with the experience of HR specialists while utilising the talents of employeesto their greatest potential. HR managers have to win the hearts of employees workingalongside line mangers and deliver results in a cost-effective manner. HR managers asindicated earlier are assuming a greater role in top management planning and decisionmaking-a trend that indicates the growing realisation among executives that HRM canmake significant contributions to the success of an organisation.

The functions of human resource management may broadly be classified into twocategories, i.e., managerial functions and operative functions.

3.2.1 Managerial Functions

The basic managerial functions comprise planning, organising, directing and controlling.

i. Planning: This function deals with the determination of the future course of actionto achieve desired results. Planning of personnel today prevents crises tomorrow.The personnel manager is expected to determine the personnel programme regardingrecruitment, selection and training of employees.

ii. Organising: This function is primarily concerned with proper grouping of personnelactivities, assigning of different groups of activities to different individuals anddelegation of authority. Creation of a proper structural framework is his primarytask. Organising, in fact, is considered to be the wool of the entire managementfabric and hence cannot afford to be ignored.

iii. Directing: This involves supervising and guiding the personnel. To execute plans,direction is essential for without direction there is no destination. Many a time, thesuccess of the organisation depends on the direction of things rather than theirdesign. Direction then consists of motivation and leadership. The personnel managermust be an effective leader who can create winning teams. While achieving results,the personnel manager must, invariably, take care of the concerns and expectationsof employees at all levels.

iv. Controlling: Controlling function of personnel management comprises measuringthe employee’s performance, correcting negative deviations and industrial assuringan efficient accomplishment of plans. It makes individuals aware of theirperformance through review reports, records and personnel audit programmes. Itensures that the activities are being carried out in accordance with stated plans.

3.2.2 Operative Functions

The operative functions of P/HRM are related to specific activities of personnelmanagement, viz., employment, development, compensation and industrial relations. Thesefunctions are to be performed in conjunction with managerial functions.

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Human Resource Management 1. Procurement function: The first operative function of personnel management isprocurement. It is concerned with procuring and employing people who possessnecessary skill, knowledge and aptitude. Under its purview you have job analysis,manpower planning, recruitment, selection, placement, induction and internal mobility.

i. Job analysis: It is the process of collecting information relating to the operationsand responsibilities pertaining to a specific job.

ii. Human resources planning: It is a process of determining and assuring thatthe organisation will have an adequate number of qualified persons, availableat proper times, performing jobs which would meet their needs and providesatisfaction for the individuals involved.

iii. Recruitment: It is the process of searching for prospective employees andstimulating them to apply for jobs in the organisation.

iv. Selection: It is the process of ascertaining qualifications, experience, skilland knowledge of an applicant with a view to appraising his/her suitability tothe job in question.

v. Placement: It is the process that ensures a 360º fit, matching the employee’squalifications, experience, skills and interest with the job on offer. It is thepersonnel manager’s responsibility to position the right candidate at the rightlevel.

vi. Induction and orientation: Induction and orientation are techniques by whicha new employee is rehabilitated in his new surroundings and introduced to thepractices, policies, and people. He must be acquainted with the principleswhich define and drive the organisation, its mission statement and valueswhich form its backbone.

vii. Internal Mobility: The movement of employes from one job to another throughtransfers and promotions is called internal mobility. Some employees leave anorganisation due to various reasons leading to resignation, retirement andeven termination. These movements are known as external mobility. In thebest interest of an organisation and its employees, such job changes should beguided by well-conceived principles and policies.

2. Development: It is the process of improving, moulding, changing and developingthe skills, knowledge, creative ability, aptitude, attitude, values and commitmentbased on present and future requirements both at the individual’s and organisation’slevel. This function includes:

i. Training: Training is a continuous process by which employees learn skills,knowledge, abilities and attitudes to further organisational and personnel goals.

ii. Executive development: It is a systematic process of developing managerialskills and capabilities through appropriate programmes.

iii. Career planning and development: It is the planning of one’s career andimplementation of career plans by means of education, training, job searchand acquisition of work experiences. It includes succession planing whichimplies identifying developing and tracking key individuals for executivepositions

iv. Human resource development: HRD aims at developing the totalorganisation. It creates a climate that enables every employee to develop anduse his capabilities in order to further both individual and organisational goals.

3. Motivation and compensation: It is a process which inspires people to give theirbest to the organisation through the use of intrinsic (achievement, recognition,responsibility) and extrinsic (job design, work scheduling, appraisal based incentives)rewards.

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Line and Staff Functionsi. Job design: Organising tasks, and responsibilities towards having a productiveunit of work is called job design. The main purpose of job design is to integratethe needs of employers to suit the requirements of an organisation.

ii. Work scheduling: Organisations must realise the importance of schedulingwork to motivate employees through job enrichment, shorter work weeksflexi-time, work sharing and home work assignments. Employees need to bechallenged at work and the job itself must be one that they value. Workscheduling is an attempt to structure work, incorporating the physical,physiological and behavioural aspects of work.

iii. Motivation: Combining forces that allow people to behave in certain ways isan integral aspect of motivation. People must have both the ability and themotivation if they are to perform at a high level. Managers generally try tomotivate people through properly administered rewards (financial as well asnon-financial).

iv. Job evaluation: Organisations formally determine the value of jobs throughthe process of job evaluation. Job evaluation is the systematic process ofdetermining the relative worth of jobs in order to establish which jobs shouldbe paid more than others within the organisation. Job evaluation helps toestablish internal equality between various jobs.

v. Performance appraisal: After an employee has been selected for a job,has been trained to do it and has worked on it for a period of time, hisperformance should be evaluated. Performance evaluation or appraisal is theprocess of deciding how employees do their jobs. It is a method of evaluatingthe behaviour of employees at the workplace and normally includes both thequantitative and qualitative aspects of job performance. It is a systematic andobjective way of evaluating work-related behaviour and potential of employees.It is a process that involves determining and communicating to an employeehow he or she is performing and ideally, establishing a plan of improvement.

The appraisal process consists of six steps: (1) establish performance standardswith employees; (2) set measurable goals (manager and employee);(3) measure actual performance; (4) compare actual performance withstandards; (5) discuss the appraisal with the employees and (6) if necessaryinitiate corrective action.

vi. Compensation administration: Compensation administration is the processof dividing how much an employee should be paid. The important goals ofcompensation administration are to design a low-cost pay plan that will attract,motivate and retain competent employees-which is also perceived to be fairby these employees.

vii. Incentives and benefits: In addition to a basic wage structure, mostorganisations nowadays offer incentive compensation based on actualperformance. Unlike incentives, benefits and services are offered to allemployees as required by law including social security, insurance, workmen'scompensation, welfare amenities etc. Organisations have been offering aplethora of other benefits and services as well as a means of ‘sweeteningthe pot’. (employee stock options, birthday gifts, anniversary gifts, paidholidays, club membership)

4. Maintenance: It aims at protecting and preserving the physical and psychologicalhealth of employees through various welfare measures.

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Human Resource Management i. Health and safety: Managers at all levels are expected to know and enforcesafety and health standards throughout the organisation. They must ensure awork environment that protects employees from physical hazards, unhealthyconditions and unsafe acts of other personnel. Through proper safety andhealth programmes, the physical and psychological well-being of employeesmust be preserved and even improved.

ii. Employee welfare: Employee welfare includes the services, amenities andfacilities offered to employees within or outside the establishment for theirphysical, psychological and social well being. Housing, transportation, educationand recreation facilities are all included in the employee welfare package.

iii. Social security measures: Managements provide social security to theiremployees in addition to fringe benefits. These measures include:(a) Workmen’s compensation to those workers (or their dependents) whoare involved in accidents; (b) Maternity benefits to women employees;(c) Sickness benefits and medical benefits; (d) Disablement benefits/allowance;(e) Dependent benefits; (f) Retirement benefits like Provident Fund, Pension,Gratuity, etc.

5. Integration function: This tries to integrate the goals of an organisation withemployee aspirations through various employee-oriented programmes, like redressinggrievances promptly, instituting proper disciplinary measures, empowering peopleto decide things independently, encouraging a participative culture, offeringconstructive help to trade unions etc.

i. Grievance redressal: A grievance is any factor involving wages, hours orconditions of employment that is used as a complaint against the employer.Constructive grievance handling depends first on the manager’s ability torecognise, diagnose and correct the causes of potential employee dissatisfactionbefore it converts into a formal grievance.

ii. Discipline: It is the force that prompts an individual or a group to observe therules, regulations and procedures, which are deemed necessary for theattainment of an objective.

iii. Teams and teamwork: Self-managed teams have emerged as the mostimportant formal groups in today’s organisations. They enhance employeeinvolvement and have the potential to create positive synergy. By increasingworker interaction, they create camaraderie among team members. Theyencourage individuals to sublimate their individual goals for those of the group.Teams have inherent strengths which ultimately lead to organisational successat various levels.

iv. Collective bargaining: It is the process of agreeing on a satisfactory labourcontract between management and union. The contract contains agreementsabout conditions of employment such as wages, hours, promotion, anddiscipline; lay off, benefits, vacations, rest pauses and the grievance procedure.The process of bargaining generally takes time, as both parties tend to makeproposals and counter- proposals. The resulting agreement must be ratifiedby unions, workers and management.

v. Employee participation and empowerment: Participation means sharingthe decision-making power with the lower ranks of an organisation in anappropriate manner. When workers participate in organisational decisionsthey are able to see the big picture clearly and also how their actions wouldimpact the overall growth of the company. They can offer feedbackimmediately based on their experiences and improve the quality of decisionsgreatly. Since they are now treated with respect, they begin to view the job

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Line and Staff Functionsand the organisation as their own, and commit themselves to organisationalobjectives whole-heartedly.

vi. Trade unions and employees association: Trade union is an associationeither of employees or employers or independent workers. It is a relativelypermanent a body formed by workers with the objective of counteringexploitation and harassment. It strives towards providing economic and socialbenefits to the labour community. Trade unions have always played a powerfulrole in improving the lot of workers in India, using aggressive bargaining tactics.However since the 90’s, the situation changed dramatically. Unable to fightthe forces of competition, many employers have been forced to shutdownunits and scale down operations. This has made both parties realise theimportance of bargaining for their rights in an atmosphere of ‘give and take’.

vii. Industrial relations: Harmonious industrial relations between labour andmanagement are essential to achieve industrial growth and higher productivity.When the relationship between the parties is not cordial, discontentmentdevelops and conflicts erupt abruptly. It is not always easy to put out the fireswith the existing dispute-settlement-machinery, created by the government.Hence both labour and management must appreciate the importance ofopenness, trust and collaboration in their day-to-day dealings.

6. Emerging issues: Effective management of human resources depends on refiningHRM practices to changing conditions. Hence the need to look at other importantissues that can motivate people to give their best in a dynamic and ever-changingenvironment.

i. Personnel records: Personnel records such as papers, files, cards, cassettesand films are maintained to have tangible record of what is actually happeningin an organisation and to formulate appropriate HR policies and programmes(based on historical records, actual experience and future trends) from timeto time.

ii. Human resource audit: Human resource audit refers to an examination andevaluation of policies, procedures and practices to determine the effectivenessof HRM. Personnel audit (a) measures the effectiveness of personnelprogrammes and practices and (b) determines what should or should not bedone in future.

iii. Human resources research: It is the process of evaluating the effectivenessof human resource policies and practices and developing more appropriateones.

iv. Human resources accounting (HRA): It is a measurement of the cost andvalue of human resources to the organisation. Human resource managementis said to be effective if its value and contribution in any organisation is morethan its cost.

v. Human resource information system: HRIS is an integrated system designedto improve the efficiency with which HR data is compiled. It makes HRrecords more useful to the management by serving as a source of information.

vi. Stress and counselling: Stress is the psychological and physical reaction tocertain life events or situations. At an organisational level, stress results inburn out, substance abuse in the form of alcohol or drug use/dependencereduced job satisfaction, increased absenteeism and increased turnover.Companies, therefore, are closely looking at what should be done to promotethe physical and mental well being of employees through proper counselingand employee development programmes.

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Human Resource Management vii. International human resource management: International business isimportant to almost every business today and so firms must increasingly bemanaged with a clear global focus. This of course, poses many challengesbefore managers including coordinating production, sales and financialoperations on a worldwide basis. International HRM places greater emphasison a number of responsibilities and functions such as relocation, orientationand training services to help employees adapt to a new and differentenvironment outside their own country.

3.3 ROLE OF HR MANAGERS

Human Resource Managers, nowadays, wear many hats. They perform mainly threedifferent types of roles, while meeting the requirement of employees and customers,namely administrative, operational and strategic.

3.3.1 Administrative Roles

The administrative roles of human resource management include policy formulation andimplementation, housekeeping, records maintenance, welfare administration, legalcompliance etc.

i. Policy maker: The human resource manger helps management in the formationof policies governing talent acquisition and retention, wage and salary administration,welfare activities, personnel records, working conditions etc. He also helps ininterpreting personnel policies in an appropriate manner.

ii. Administrative expert: The administrative role of an HR manager is heavilyoriented to processing and record keeping. Maintaining employee files, and HR-related databases, processing employee benefit claims, answering queries regardingleave, transport and medical facilities, submitting required reports to regulatoryagencies are examples of the administrative nature of HR management. Theseactivities must be performed efficiently and effectively to meet changing requirementsof employees, customers and the government.

iii. Advisor: It is said that personnel management is not a line responsibility but a stafffunction. The personnel manager performs his functions by advising, suggesting,counselling and helping the line managers in discharging their responsibilities relatingto grievance redressal, conflict resolution, employee selection and training. Personneladvice includes preparation of reports, communication of guidelines for theinterpretation and implementation of policies, providing information regarding labourlaws etc.

iv. Housekeeper: The administrative roles of a personnel manager in managing theshow include recruiting, pre-employment testing, reference checking, employeesurveys, time keeping, wage and salary administration, benefits and pensionadministration, wellness programmes, maintenance of records etc.

v. Counsellor: The personnel manager discusses various problems of the employeesrelating to work, career, their supervisors, colleagues, health, family, financial, social,etc. and advises them on minimising and overcoming problems, if any.

vi. Welfare officer: Personnel manager is expected to be the Welfare Officer of thecompany. As a Welfare officer he provides and maintains (on behalf of the company)canteens, hospitals, creches, educational institutes, clubs, libraries, conveyancefacilities, co-operative credit societies and consumer stores. Under the FactoriesAct, Welfare officers are expected to take care of safety, health and welfare ofemployees. The HR managers are often asked to oversee if everything is in linewith the company legislation and stipulation.

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Line and Staff Functionsvii. Legal consultant: Personnel manager plays a role of grievance handling, settlingof disputes, handling disciplinary cases, doing collective bargaining, enabling theprocess of joint consultation, interpretation and implementation of various labourlaws, contacting lawyers regarding court cases, filing suits in labour courts, industrialtribunals, civil courts and the like.

In some organisations, the above administrative functions are being outsourced to externalproviders in recent times, with a view to increasing efficiency as also cutting operationalcosts. Technology, is being put to good use to automate many of the administrative tasks.

3.3.2 Operational Roles

These roles are tactical in nature and include recruiting, training and developing employees;coordinating HR activities with the actions of managers and supervisors throughout theorganisation and resolving differences between employees.

i. Recruiter: “Winning the war for talent” has become an important job of HRmanagers in recent times in view of the growing competition for people possessingrequisite knowledge, skills and experience. HR managers have to use theirexperience to good effect while laying down lucrative career paths to new recruitswithout, increasing the financial burden to the company.

ii. Trainer developer, motivator: Apart from talent acquisition, talent retention isalso important. To this end, HR managers have to find skill deficiencies from timeto time, offer meaningful training opportunities, and bring out the latent potential ofpeople through intrinsic and extrinsic rewards which are valued by employees.

iii. Coordinator/linking pin: The HR manager is often deputed to act as a linking pinbetween various divisions/departments of an organisation. The whole exercise ismeant to develop rapport with divisional heads, using PR and communication skillsof HR executives to the maximum possible extent.

iv. Mediator: The personnel manager acts as a mediator in case of friction betweentwo employees, groups of employees, superiors and subordinates and employeesand management with the sole objective of maintaining industrial harmony.

v. Employee champion: HR managers have traditionally been viewed as ‘companymorale officers’ or employee advocates. Liberalisation, privatisation and globalisationpressures have changed the situation dramatically HR professionals have had tomove closer to the hearts of employees in their own self interest. To deliver resultsthey are now seriously preoccupied with:

l Placing people on the right job.

l Charting a suitable career path for each employee.

l Rewarding creditable performance.

l Resolving differences between employees and groups smoothly.

l Adopting family-friendly policies.

l Ensuring fair and equitable treatment to all people regardless of theirbackground.

l Striking a happy balance between the employee's personal/professional asalso the larger organisational needs.

l Representing workers’ issues, problems and concerns to the management inorder to deliver effective results HR managers have to treat their employeesas valuable assets. Such an approach helps to ensure that HR practices andprinciples are in sync with the organisation’s overall strategy. It forces theorganisation to invest in its best employees and ensure that performancestandards are not compromised.

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Human Resource Management 3.3.3 Strategic Roles

An organisation’s success increasingly depends on the knowledge, skills and abilities ofits employees, particularly as they help establish a set of core competencies (activitiesthat the firm performs especially well when compared to its competitors and throughwhich the firm adds value to its goods and services over a long period of time, e.g.ONGC 's oil exploration capabilities and Dell's ability to deliver low cost, high-qualitycomputers at an amazing speed) that distinguish an organisation from its competitors.When employees’ talents are valuable, rare, difficult to imitate and organised, a firm canachieve sustained competitive advantage through its people. The strategic role of HRmanagement focuses attention on how to enable ordinary employees to turn outextraordinary performance, taking care of their ever-changing expectations. The keyareas of attention in this era of global competition include effective management of keyresources (employees, technology, work processes), while delivering cost effective, value-enhancing solutions

i. Change agent: Strategic HR as it is popularly called now aims at building theorganisation’s capacity to embrace and capitalise on change. It makes sure thatchange initiatives that are focused on creating high-performing teams, reducingcycle time for innovation, or implementing new technology are defined, developedand delivered in a timely manner. The HR manager in his new avtar would helpemployees translate the vision statements into a meaningful format (Ulrich, 1998).HR's role as a change agent is to replace resistance with resolve, planning withresults and fear of change with excitement about its possibilities. HR helps anorganisation identify the key success factors for change and assess theorganisation’s strengths and weaknesses regarding each factor. It may not decidewhat changes the organisation is going to embrace, but it would certainly lead theprocess to make them explicit. In helping to bring about a new HR environmentthere needs to be clarity on issues like who is responsible for bringing about change?Why do it? What will it look when we are done? Who else needs to be involved? ,How will it be measured? How will it be institutionalised? How will it be measured?How will it get initiated, developed and sustained?

ii. Strategic partner: HR’s role is not just to adapt its activities to the firm’s businessstrategy, nor certainly to carry out fire-fighting operations like compensatingemployees. Instead, it must deliver strategic services cost effectively by building acompetent, consumer-oriented work force. It must assume important roles in strategyformulation as well strategy implementation. To this end, it must identify externalopportunities from time to time, develop HR based competitive advantages andmove in to close the gaps advantageously (like excellent training centre, designcentre, automation centre etc. which could be used by others as well). Whileimplementing strategies, HR should develop appropriate ways to restructure workprocesses smoothly.

Check Your Progress

1. Discuss HRM Development in a Matrix organisation and structure taking asuitable example.

2. What is sweetening the pot means?

3. Multiple choice questions:

(a) In the organisation, authority flows in a direct line from

(i) Supervisor to Managers

(ii) Supervisor to SupervisorContd....

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Line and Staff Functions(iii) Supervisor to Subordinates

(iv) Subordinates to Subordinates

(b) Personal Manager report

(i) Horizontal dimension

(ii) Vertical dimension

(c) Project Manager represent

(i) Vertical dimension

(ii) Horizontal dimension

(d) Matrix structure referred to

(i) Vertical dimension

(ii) Horizontal dimension

(iii) Multicommand system

(iv) Vertical, not horizontal

(v) Horizontal, not vertical

3.4 LET US SUM UP

HR can initiate systematic efforts to enhance skill levels of employees so that the firmcan compete on quality. Globalisation, deregulation and technological innovations have,in recent times, created the need for rather, faster and more competitive organisations.The basic managerial functions comprise planning, organising, directing and controlling.The administrative roles of human resource management include policy formulation andimplementation, housekeeping, records maintenance, welfare administration, legalcompliance etc. Operational roles are tactical in nature and include recruiting, trainingand developing employees; coordinating HR activities with the actions of managers andsupervisors throughout the organisation and resolving differences between employees.


Provide two examples of companies you are familiar with, which are not using theirHRM programmers to maintain or create a competitive advantage. What specificsuggestions would you offer to them.

3.6 KEYWORDS

Job evaluation

Motivation

Grievance Redressal

HRA (Human Resource Academy)

Lean and Mean organisaiton


1. What are the administrative roles of an HR Manager?

2. What are the different operational roles of a Manager?

3. Who is a employee champion?

34

Human Resource Management 4. What are the strategic roles of an HR Manager?

5. Why is it correct to say that all Managers are involved in the HRM function?

6. Critically examine the present state of HRM in India.

7. Why is it important for a company to make in HR into a competitive advantage?








Unit-II

LESSON

4JOB ANALYSIS

CONTENTS


4.1 Introduction

4.2 Methods of Job Analysis

4.3 IT and Computerised Skill Inventory

4.4 Writing Job Specification

4.5 HR and the Responsive Organisation

4.6 Let us Sum Up


4.8 Keywords




In this lesson we shall discuss about job analysis. After going through this lesson you will

be able to:

(i) Describe methods of job analysis.

(ii) Understand IT and computerised skill inventory and writing job specification.

(iii) Analyse HR and the responsive organisation.

4.1 INTRODUCTION

Job analysis is a formal and detailed examination of jobs. It is a systematic investigation

of the tasks, duties and responsibilities necessary to do a job. A task is an identifiable

work activity carried out for a specific purpose, for example, typing a letter. A duty is a

larger work segment consisting of several tasks (which are related by some sequence of

events) that are performed by an individual, for example, pick up, sort out and deliver

incoming mail. Job responsibilities are obligations to perform certain tasks and duties.

Job analysis is an important personnel activity because it identifies what people do in

their jobs and what they require in order to do the job satisfactorily. The information

about a job is usually collected through a structured questionnaire:

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Human Resource Management Box 4.1: Partial Job Analysis Questionnaire

JOB ANALYSIS INFORMATION FORMAT

Your Job Title____________________ Code____________ Date___________________

Class Title_______________________Department______________________________

Your Name______________________Facility_________________________________

Superior’s Title___________________ Prepared by_____________________________

Superior’s Name__________________

Hours Worked__________AM______to AM____ PM ____PM____

1. What is the general purpose of your job?

2. What was your last job? If it was in another organisation, please name it.

3. To what job would you normally expect to be promoted?

4. If you regularly supervise others, list them by name and job title.

5. If you supervise others, please check those activities that are part of your supervisoryduties:

¨ Hiring ¨ Coaching ¨Promoting

¨ Orienting ¨ Counselling ¨Compensating

¨ Training ¨ Budgeting ¨ Disciplining

¨ Scheduling ¨Directing ¨ Terminating

¨ Developing ¨ Measuring Performances Other____________

6. How would you describe the successful completion and results of your work?

7. Job Duties – Please briefly describe WHAT you do and, if possible, How you do it. Indicatethose duties you consider to be most important and/or most difficult:

(a) Daily Duties

(b) Periodic Duties (Please indicate whether weekly, monthly, quarterly, etc.)

(c) Duties Performed at Irregular Intervals

8. Education – Please check the blank that indicates the educational requirements for the job,not your own educational background.

¨ No formal education required ¨ College degree

¨ Less than high school diploma ¨ Education beyond graduate

¨ High school diploma or equivalent degree and/or professional license.

¨ College certificate or equivalent

List advanced degrees or specified professional license or certificate required.

Please indicate the education you had when you were placed on this job.

Source: Richard I Henderson, Compensation Management (Reston, Va.: Reston Publishing. 1976),pp. 98-99.

4.2 METHODS OF JOB ANALYSIS

A variety of methods, are used to collect information about jobs. None of them, however,is perfect. In actual practice, therefore, a combination of several methods is used forobtaining job analysis data. These are discussed below.

1. Job performance: In this method, the job analyst actually performs the job inquestion. The analyst thus receives first-hand experience of contextual factors onthe job including physical hazards, social demands, emotional pressures and mentalrequirements. This method is useful for jobs that can be easily learned. It is not

39

Job Analysissuitable for jobs that are hazardous (e.g., fire fighters) or for jobs that requireextensive training (e.g., doctors, pharmacists).

2. Personal observation: The analyst observes the worker(s) doing the job. Thetasks performed, the pace at which activities are done, the working conditions,etc., are observed during a complete work cycle. During observation, certainprecautions should be taken:

i. The analyst must observe average workers during average conditions.

ii. The analyst should observe without getting directly involved in the job.

iii. The analyst must make note of the specific job needs and not the behavioursspecific to particular workers.

iv. The analyst must make sure that he obtains a proper sample for generalisation.

This method allows for a deep understanding of job duties. It is appropriate formanual, short period job activities. On the negative side, the method fails to takenote of the mental aspects of jobs.

3. Critical incidents: The critical incident technique (CIT) is a qualitative approachto job analysis used to obtain specific, behaviourally focused descriptions of workor other activities. Here the job holders are asked to describe several incidentsbased on their past experience. The incidents so collected are analysed and classifiedaccording to the job areas they describe. The job requirements will become clearonce the analyst draws the line between effective and ineffective behaviours ofworkers on the job. For example, if a shoe salesman comments on the size of acustomer’s feet and the customer leaves the store in a huff, the behaviour of thesalesman may be judged as ineffective in terms of the result it produced. Thecritical incidents are recorded after the events have already taken place – bothroutine and non-routine. The process of collecting a fairly good number of incidentsis a lengthy one. Since incidents of behaviour can be quite dissimilar, the process ofclassifying data into usable job descriptions can be difficult. The analysts overseeingthe work must have analytical skills and ability to translate the content of descriptionsinto meaningful statements.

4. Interview: The interview method consists of asking questions to both incumbentsand supervisors in either an individual or a group setting. The reason behind the useof this method is that job holders are most familiar with the job and can supplementthe information obtained through observation. Workers know the specific duties ofthe job and supervisors are aware of the job’s relationship to the rest of theorganisation.

Due diligence must be exercised while using the interview method. The interviewermust be trained in proper interviewing techniques. It is advisable to use a standardformat so as to focus the interview to the purpose of the analyst.

Box 4.2: Guidelines for Conducting Job Analysis Interviews

l Put the worker at ease; establish rapport.

l Make the purpose of the interview clear.

l Encourage the worker to talk by using empathy creativity.

l Help the worker to think and talk according to the logical sequence of the duties performed.

l Ask the worker only one question at a time.

l Phrase questions carefully so that the answers will be more than just “yes” or “no”.

l Avoid asking leading questions.

l Secure specified and complete information pertaining to the work performed and the worker’straits. Contd....

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Human Resource Management l Conduct the interview in plain, easy language.

l Consider the relationship of the present job to other jobs in the department.

l Control the time and subject matter of the interview.

l Be patient and considerate to the worker.

l Summarise the information obtained before closing the interview.

l Close the interview promptly.

Although the interview method provides opportunities to elicit information sometimesnot available through other methods, it has its limitations. First, it is time consumingand hence costly. Second, the value of data is primarily dependent on the interviewers’skills and may be faulty if they put ambiguous questions to workers. Last,interviewees may be suspicious about the motives and may distort the informationthey provide. If seen as an opportunity to improve their positions such as to increasetheir wages, workers may exaggerate their job duties to add greater weightage totheir positions.

5. Panel of experts: This method utilises senior job incumbents and superiors withextensive knowledge of the job. To get the job analysis information, the analystconducts an interview with the group. The interaction of the members during theinterview can add insight and detail that the analyst might not get from individualinterviews.

6. Diary method: Several job incumbents are asked to keep diaries or logs of theirdaily job activities – according to this method – and record the amount of timespent on each activity. By analysing these activities over a specified period oftime, a job analyst is able to record the job’s essential characteristics. However, itis a time consuming and costly exercise in that the analyst has to record entries fora painfully long time.

7. Questionnaire method: The questionnaire is a widely used method of analysingjobs and work. Here the job holders are given a properly designed questionnaireaimed at eliciting relevant job-related information. After completion, thequestionnaires are handed over to supervisors. The supervisors can seek furtherclarifications on various items by talking to the job holders directly. After everythingis finalised, the data is given to the job analyst.

The success of the method depends on various factors. The structured questionnairemust cover all job related tasks and behaviours. Each task or behaviour should be describedin terms of features such as importance, difficulty, frequency, relationship to overallperformance, etc. The job holders should be asked to properly rate the various job factorsand communicate the same on paper. The ratings thus collected are then put to closeexamination with a view to find out the actual job requirements.

The Questionnaire method is highly economical as it covers a large number of job holdersat a time. The collected data can be quantified and processed through a computer. Theparticipants can complete the items leisurely. Designing questionnaires, however, is notan easy task. Proper care must be taken to frame the questions in such a way that therespondents are unlikely to misinterpret the questions. Further, it is difficult to motivatethe participants to complete the questionnaires truthfully and to return them.

4.3 IT AND COMPUTERISED SKILL INVENTORY

The growth of Internet has changed the hiring landscape. Job seekers register theirresume on the website and they are informed of vacancies in any organisation thatmatch their qualifications through e-mail. Example of such websites in India arewww.naukri.com, www.jobsahead.com.

41

Job AnalysisAutomated staffing software would seem to provide a much-needed technological edgefor human resource professionals in the high-tech age. It allows employers to create areusable pool of applicants from resumes they receive. Resumes received by employersmay be in electronic formats—through e-mails, Internet applications or diskettes — oron paper that must be optically scanned and converted into computer files. The softwareprogrammes typically rank the resumes on the basis of how well each applicant matchesthe employer’s criteria.

4.4 WRITING JOB SPECIFICATION

Job specification summarises the human characteristics needed for satisfactory jobcompletion. It tries to describe the key qualifications someone needs to perform the jobsuccessfully. It spells out the important attributes of a person in terms of education,experience, skills, knowledge and abilities (SKAs) to perform a particular job. The jobspecification is a logical outgrowth of a job description. For each job description, it isdesirable to have a job specification. This helps the organisation to determine what kindof persons are needed to take up specific jobs. The personal attributes that are describedthrough a job specification may be classified into three categories:

i. Essential attributes: skills, knowledge and abilities (SKAs) a person must possess.

ii. Desirable attributes: qualifications a person ought to possess.

iii. Contra-indicators: attributes that will become a handicap to successful jobperformance.

A job specification can be developed by talking with the current job holders about theattributes required to do the job satisfactorily. Opinions of supervisors could also be usedas additional inputs. Checking the job needs of other organisations with similar jobs willalso help in developing job specifications.

Box 4.3: An Example of Job Specification

Duties/Responsibilities Knowledge Skills Social Skillsand Tasks

1. Maintain cleanliness offront-of-house area,including exterior

(i) Clean windows and Cleaning materials, Window and general Problems ofglass doors in Stores indent glass work interruption byentrance and foyer procedure cleaning guests

(Diplomacy)

(ii) Clean and polish floor parquet floor care, Use of mechanicalof entrance hall standards required cleaner/polisher

(iii) Cleaning and Recognition of Procedure for cleaning Liaison withmaintenance of electrical faults on plastic advertisement maintenanceexterior advertisement signs (to inform signs, use of menu, departmentand menu display maintenance), routine receptionist cases. How liaison with staffcases for menu display case to change menus

especially when todisplay

2. Check and sort incoming Current guest lists, Sorting Mail into Ethics of mailmail and newspapers staff currently appropriate sections. handling

employed. Use of pigeon hole (attitudes to)sorting system.

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Human Resource Management 4.5 HR AND THE RESPONSIVE ORGANISATIONCertain techniques that have helped in redefining jobs in this manner may be worthmentioning here:

i. Flatter organisations: Most progressive organisations have opted in favour oftrimming the ‘flab’ at the top level, reducing the traditional pyramidical structuresto barely three or four levels. As the remaining managers are left with more peoplereporting to them, they can supervise them less, so the jobs of subordinates end upbigger in terms of both breadth and depth of responsibilities (Dessler, p. 83).

ii. Work teams: Yesterday’s jobs were dominated by the rigidity associated withthem. Workers performed the same tasks daily. Now the situation is different.Work itself is increasingly organised around teams and processes rather than aroundspecialised functions. Cross-functional, self-directed teams handle different jobs atdifferent points of time. Individuals will work with other workers for a specifiedperiod of time and then take up another project. The project can be in the organisationas well as outside it. Workers will perform their duties as members of projectteams, not necessarily as members of a particular department within the organisation.

iii. The boundaryless organisation: In a boundaryless organisation, the boundariesthat typically separate organisational functions (production, marketing, finance, etc.)and hierarchical levels are reduced and made more permeable. Cross-functionalteams are created and used widely. Employees are encouraged to get rid of “It isnot my job” kind of attitudes. The focus, instead, is put on defining the job in aflexible way, keeping the best interests of the organisation in the background.

iv. Reengineering: Reengineering brings about a radical, quantum change in anorganisation. It requires organisational members to rethink what work should bedone, how it is to be done and how to best implement these decisions. Reengineeringis achieved in several ways:

l Specialised jobs are combined and enlarged.

l Each person’s job is made more interesting and challenging. Supervisorychecks are reduced. Employees are allowed to oversee their own work.

l Workers are made collectively responsible for overall results rather thanindividually responsible for just their own tasks.

l The primary focus is on the customer and building an organisation structurethat is production friendly. Workers are empowered to use more decision-making authority while carrying out work in small teams.

Check Your Progress

1. Fill in the blanks

(a) Job analysis is a ............... and ............... examination of jobs.

(b) ............... is a systematic investigation of the tasks duties & responsibilities.

(c) A ............... is an identifiable work activity carried out for a specific purpose.

(d) A ............... is a larger work segment consisting of several tasks.

(e) Job responsibilities are ............... to perform certain tasks and duties.

(f) The information about a job is usually collected through a structured ...............

(g) In ............... the job analyst actually perform the job in question.

Contd....

43

Job Analysis(h) In ............... the analyst observer the worker(s) doing the job.

(i) The ............... method consist of along questions to both incumbents andsupervisors.

(j) ............... summarises the human characteristics needed for satisfactory job.

2. Explain how the growth of Internet has change the wiring landscape.

4.6 LET US SUM UP

Job analysis is a systematic investigation of the tasks, duties and responsibilities necessaryto do a job. Job analysis is an important personnel activity because it identifies whatpeople do in their jobs and what they require in order to do the job satisfactorily. Avariety of methods, are used to collect information about jobs. None of them, however, isperfect. In actual practice, therefore, a combination of several methods is used for obtainingjob analysis data. These are job performance, personal observation, critical incidents,interview, panel of experts, diary method, questionnaire method. The growth of Internethas changed the hiring landscape. Job seekers register their resume on the website andthey are informed of vacancies in any organisaiton that match their qualifications throughe-mail. Example of such websites in India are ww.naukri.com, www.jobsahead.com.


Working with a group of three or four students, collect at least five different job descriptionsfrom reputed organisations operating in your area. Compare the descriptions, highlightingsimilarities and differences.

4.8 KEYWORDS

Job Analysis

Job Performance

Personal Observation

Critical Incidents

Interview

Panel of Experts

Essential Attributes

Flatter Organisation, Reengineering


1. Distinguish between job analysis and job specification.

2. Write short notes on:

(a) Uses of job analysis

(b) Job analysis interview

(c) Job specification

(d) Tasks

(e) Duty

3. “Job Analysis is the most basic personnel activity.” Discuss

44

Human Resource Management 4. Construct a job specification considering various jobs attributes.

5. Why is the design of work on important issue for a manager to be concernedabout?

6. Discuss some techniques that have helped in redefining job?








LESSON

5RECRUITMENT AND SELECTION PROCESS

CONTENTS


5.1 Introduction

5.2 What is Recruitment?

5.2.1 Constraints and Challenges

5.2.2 Selection Process

5.3 Employment Planning and Forecasting

5.3.1 Importance

5.3.2 The Process of Human Resource Planning

5.3.3 Preparing Manpower Inventory (Supply Forecasting)

5.3.4 Determining Manpower Gaps

5.3.5 Formulating HR Plans

5.3.6 Responsibility for HRP

5.4 Let us Sum up


5.6 Keywords




In this lesson we will discuss about recruitment and selection process. After going throughthis lesson you will be able to:

(i) Analyse recruitment

(ii) Discuss employment planning and forecasting

5.1 INTRODUCTION

Recruitment and selection are the process of locating and encouraging potential applicantsto apply for existing or anticipated job openings. Certain influences restrain (the freedomof) managers while choosing a recruiting source such as: image of the company,attractiveness of the job, internal policies, budgeting support, government policies etc.Companies generally rely on time lapse data, yield ratios, surveys etc., to evaluate thesources of recruiting carefully.

46

Human Resource Management 5.2 WHAT IS RECRUITMENT?

Recruitment is the process of locating and encouraging potential applicants to apply forexisting or anticipated job openings. It is actually a linking function, joining together thosewith jobs to fill and those seeking jobs. Recruitment, logically, aims at (i) attracting alarge number of qualified applicants who are ready to take up the job if it's offered and(ii) offering enough information for unqualified persons to self-select themselves out (forexample, the recruitment ad of a foreign bank may invite applications from charteredaccountants who have cleared the CA examination in the first attempt only).

5.2.1 Constraints and Challenges

In actual practice, it is always not easy to find and select a suitable candidate for a jobopening. The recruiter’s choice of a communication medium (e.g. advertising in a tradejournal read by the prospective candidate) may not be appropriate. Some of the brightcandidates may begin to view the vacancy as not in line with their current expectations(e.g. challenging work, excellent rewards, flexible schedules and so on).

The most suitable ones may not have been motivated to apply due to several otherconstraints.

l Poor image: If the image of a firm is perceived to be low (due to factors such asoperating in a declining industry, earning a bad name because of environmentalpollution, poor quality products, nepotism, insider trading allegations against promotersetc.), the likelihood of attracting a large number of qualified applicants is reduced.

l Unattractive job: If the job to be filled is not very attractive, most prospectivecandidates may turn indifferent and may not even apply. This is especially true incase of jobs that are dull, boring, anxiety producing, devoid of career growthopportunities and generally do not reward performance in a proper way. (e.g., jobsin departmental undertakings such as Railways, Post and Telegraphs, public sectorbanks and Insurance companies failing to attract talent from premier managementinstitutes.)

l Conservative internal policies: A policy of filling vacancies through internalpromotions based on seniority, experience, job knowledge etc. may often come inthe way of searching for qualified hands in the broader job market in an unbiasedway. Likewise, in firms where powerful unions exist, managers may be compelledto pick up candidates with questionable merit, based on issues such as caste, race,religion, region, nepotism, friendship etc.

l Limited budgetary support : Recruiting efforts require money. Sometimes becauseof limited resources, organisations may not like to carry on the recruiting efforts forlong periods of time. This can, ultimately, constrain a recruiter’s efforts to attractthe best person for the job.

l Restrictive policies of government: Governmental policies often come in the wayof recruiting people as per the rules for company or on the basis of merit/seniority,etc. For example, reservations for special groups (such as scheduled castes,scheduled tribes, backward classes, physically handicapped and disabled persons,ex-servicemen, etc.) have to be observed as per Constitutional provisions whilefilling up vacancies in government corporations, departmental undertakings, localbodies, quasi-government organisations, etc.

5.2.2 Selection Process

The selection process is a series of steps through which applicants pass.

i. Preliminary Reception: Selection starts with a visit to the HRM office or with awritten request for an application. If an applicant appears in person, an impromptu

47

Recruitment andSelection Process

preliminary interview may be granted as a courtesy, simply as a matter of goodpublic relations.

ii. Employment Tests: Employment tests are devices that assess the probable matchbetween applicants and job requirements. When tests are used for these positions,however, they often are a simulation of real-life situations.

a. Test Validation: For a test to be relied upon, it should be valid. Validity meansthat the test scores have a significant correlation to job performance or tosome other relevant criterion.

b. Testing Tools: There is a wide variety of employment tests. But each type oftest has only limited usefulness. The exact purpose of a test, its design, itsdirection for administration and its applications are recorded in the test manual,which should be reviewed before a test is used.

5.3 EMPLOYMENT PLANNING AND FORECASTING

The basic purpose of having a human resource plan is to have an accurate estimate ofthe number of employees required, with matching skill requirements to meet organisationalobjectives. It provides information about the manner in which existing personnel areemployed, the kind of skills required for different categories of jobs and human resourcerequirements over a period of time in relation to organisational objectives. It would alsogive an indication of the lead time that is available to select and train the required numberof additional manpower.

More specifically, HR planning is required to meet the following objectives:

i. Forecast personnel requirements: HR planning is essential to determine the futuremanpower needs in an organisation. In the absence of such a plan, it would bedifficult to have the services of right kind of people at the right time.

ii. Cope with changes: HR planning is required to cope with changes in marketconditions, technology, products and government regulations in an effective way.These changes may often require the services of people with the requisite technicalknowledge and training. In the absence of an HR plan, we may not be in a positionto enlist their services in time.

iii. Use existing manpower productively: By keeping an inventory of existingpersonnel in an enterprise by skill, level, training, educational qualifications, workexperience, it will be possible to utilise the existing resources more usefully inrelation to the job requirements. This also helps in decreasing wage and salarycosts in the long run.

iv. Promote employees in a systematic manner: HR planning provides usefulinformation on the basis of which management decides on the promotion of eligiblepersonnel in the organisation. In the absence of an HR plan, it may be difficult toensure regular promotions to competent people on a justifiable basis.

5.3.1 Importance

Human Resource Planning is a highly important and useful activity. If used properly, itoffers a number of benefits:

i. Reservoir of talent: The organisation can have a reservoir of talent at any point oftime. People with requisite skills are readily available to carry out the assignedtasks.

ii. Prepare people for future: People can be trained, motivated and developed inadvance and this helps in meeting future needs for high-quality employees quiteeasily. Likewise, human resource shortages can also be met comfortably (whenpeople quit the organisation for various reasons) through proper human resourceplanning.

48

Human Resource Management iii. Expand or contract: If the organisation wants to expand its scale of operations, itcan go ahead easily. Advance planning ensures a continuous supply of people withrequisite skills who can handle challenging jobs easily.

iv. Cut costs: Planning facilitates the preparation of an appropriate HR budget foreach department or division. This, in turn, helps in controlling manpower costs byavoiding shortages/excesses in manpower supply. The physical facilities such ascanteen, quarters, school, medical help, etc., can also be planned in advance.

v. Succession planning: Human Resource Planning, as pointed out previously,prepares people for future challenges. The ‘stars’ can be picked up and kept readyfor further promotions whenever they arise. All multinational companies for example,have this policy of having a ‘hot list’ of promising candidates prepared in advancee.g., HLL, Proctor & Gamble, Godrej consumer products etc.3 Such candidatesare rolled over various jobs and assessed and assisted continuously. When the timecomes, such people ‘switch hats’ quickly and replace their respective bosses withoutany problem.

5.3.2 The Process of Human Resource Planning

The process of HRP usually followed in a large organisation, consists of the followingsteps:

Forecasting the Demand for Human Resources

Most firms estimate how many employees they require in future. The demand for humantalent at various levels is primarily due to the following factors:

1. External challenges: These challenges arise from three important sources:

i. Economic developments: Liberalisation, opening up of banking sector, capitalmarket reforms, the on-line trading systems have created huge demand forfinance professionals during 1990-1995 in India. The late 90s saw the rise ofmanufacturing, FMCG, Pharmaceuticals, Auto-components, Healthcare andChemical Industries in a steady manner. Consequently, the demand forEngineering and Management graduates, Scientists and Healthcareprofessionals has picked up in recent times.

ii. Political, legal, social and technical changes: The demand for certaincategories of employees and skills is also influenced by changes in political,legal and social structure in an economy. Likewise, firms employing latesttechnology in construction, power, automobiles, software, etc., have greatlyenhanced the worth of technicians and engineers during the last couple ofyears. Technology, however, is a double-edged weapon and hence, its impacton HR plans is difficult to predict. For example, computerisation programmein Banks, Railways, Post and Telegraph Departments may reduce demand inone department (book keeping, for example) while increasing it in another(such as computer operations). High technology with all its attendant benefitsmay compel organisations to go lean and downsize workforce suddenly.Employment planning under such situations becomes complicated.

iii. Competition: Companies operating in fields where a large number of playersare bent upon cutting each other’s throat (with a view to enhance their marketshares) often reduce their workforce. Competition is beneficial to customersbut suicidal for companies operating on thin margins. Such companies haveto necessarily go ‘lean’ by reducing their workforce. On the other hand,companies that are doing well and progressing smoothly will always look forpeople with critical skills.

49


2. Organisational decisions: The organisation’s strategic plan, sales and productionforecasts and new ventures must all be taken into account in employment planning.If Britannia Industries Ltd expects higher demand for biscuits and bread, the long-term HR plan must take this into consideration. Likewise, if it tries to venture intoother lucrative fields such as milk based products and confectionery items, thedemand for people possessing requisite skills in those areas in the next couple ofyears should be looked into carefully.

3. Workforce factors: Demand is modified by retirements, terminations, resignations,deaths and leaves of absence. Past experience, however, makes the rate ofoccurrence of these actions by employees fairly predictable.

4. Forecasting techniques: The manpower forecasting techniques commonlyemployed by modern organisations are given below:

i. Expert forecasts: In this method, managers estimate future human resourcerequirements, using their experiences and judgements to good effect.

ii. Trend analysis: HR needs can be estimated by examining past trends. Pastrates of change can be projected into the future or employment growth canbe estimated by its relationship with a particular index.

Box 5.1: Trend Analysis (An Example)

2001-02 Production of Units : 5,000

2002-03 No. of Workers : 100

Ratio : 100:5000

2003-04 Estimated Production : 8,000

No. of Workers required : 8000 × 100

5000 = 160

If supervisors have a span of 20 workers, 8 supervisors are also needed in 2003-04.

5. Other methods: Several mathematical models, with the aid of computers are alsoused to forecast HR needs, e.g., regression, optimisation models, budget and planninganalysis.

To proceed systematically, human resource professionals generally follow threesteps. Let’s examine these steps as applied in respect of, say a commercial bank.

i. Workforce analysis: The average loss of manpower due to leave, retirement,death, transfer, discharge, etc., during the last 5 years may be taken intoaccount. The rate of absenteeism and labour turnover should also be takeninto account. The nature of competition say from foreign banks, other non-banking financial institutions may also be considered here to find out actualrequirements in a year (Box. 5.2).

Box 5.2: Manpower Flows in a Bank

Promotions outTransfers In > > Job Hopping

> Transfers Out

> Retirement

> VRS Scheme (Golden handshake)

Recruits In > > Discharge or Dismissal

> Terminations

> Resignations

Promotions In > > Retrenchment

> Attractions in Other Banks, etc.

50

Human Resource Management While some of the interchanges and external supply could be predicted (growthopportunities, promotions, transfers, retirements, etc.) others are not so easyto predict. Past experience and historical data may help bank managers inthis regard.

ii. Work load analysis: The need for manpower is also determined on the basisof work-load analysis, wherein the company tries to calculate the number ofpersons required for various jobs with reference to a planned output – aftergiving weightage to factors such as absenteeism, idle time, etc. The followingexample would throw light on this:

Box 5.3: Work Load Analysis (An Example)

Planned output for the year 10,000 pieces

Standard hours per piece 3 hours

Planned hours required 30,000 hours

Productive hours per person per year 1,000 hours (estimated on annual basis)

(allowing for absenteeism, turnover, idle time etc.)

No. of workers required 30

If span of control in the unit is 10 per officer, then 3 officers are also required.

While determining manpower requirements through work load analysis,commercial banks may have to take the following factors into consideration:(i) the number of transactions to be handled by an employee; (ii) the amountof deposits and advances per employee; (iii) special requirements in respectof managing extension counters, currency chests, mobile branches, etc.; (iv)future expansion plans of the bank concerned. Managerial judgement – astudy of the past trends – may serve as a useful guide in this regard. Statisticaland econometric models may also be pressed into service, sometimes,depending on the requirement(s).

iii. Job analysis: Job analysis helps in finding out the abilities or skills required todo the jobs efficiently. A detailed study of jobs is usually made to identify thequalifications and experience required for them. Job analysis includes twothings: Job description and job specification. Job description is a factualstatement of the duties and responsibilities of a specific job. It gives anindication of what is to be done, how it is to be done and why it is to be done.Job specification provides information on the human attributes in terms ofeducation, skills, aptitudes and experience necessary to perform a jobeffectively.

5.3.3 Preparing Manpower Inventory (Supply Forecasting)

The basic purpose of preparing manpower inventory is to find out the size and quality ofpersonnel available within the organisation to man various positions. Every organisationwill have two major sources of supply of manpower: internal and external.

1. Internal labour supply: A profile of employees in terms of age, sex, education,training, experience, job level, past performance and future potential should be keptready for use whenever required. Requirements in terms of growth/diversification,internal movement of employees (transfer, promotions, retirement, etc.) must alsobe assessed in advance. The possibilities of absenteeism and turnover should bekept in mind while preparing the workforce analysis. Through replacement chartsor succession plans, the organisation can even find out the approximate date(s) bywhich important positions may fall vacant. Frequent manpower audits may be carriedout to find out the available talent in terms of skills, performance and potential. (see Figure 5.1)

Some of the important forecasting techniques may be summarised thus:

51


i. Staffing table: It shows the number of employees in each job. It tries toclassify employees on the basis of age, sex, position, category, experience,qualifications, skills, etc. A study of the table indicates whether currentemployees are properly utilised or not.

Figure 5.1: Estimated Internal Labour Supply for a given Firm

ii. Markov Analysis: In hierarchical systems, routes for the employees, whichis the promotion ladder, are well defined. It means every employee elevateshimself in the organisation through a well defined career path. All employeesstart in an organisation at the bottom rung and climb up the ladder one at atime. Any wastage is falling off the ladder. Young and Almond (1961), deviseda hierarchical manpower system, framing sub-groups on the basis of salarygrade and length of service. They have used the theory of the Markov processto measure the long-term equilibrium distribution of staff among the sub-groups. The basic assumption of this model is that an employee in a particulargrade or a status group has a fixed chance of promotion in a given year,independent of vacancy. Thus number receiving promotion depends on thenumber of eligible staff in the grade below, subject to fulfillment of eligibilitycriteria, which may be age, seniority, qualifications or experience. The centralequation for this model is:

n (t + 1) = n (t) P + R (t+1)r

Where, n (t) is the vector of stocks at a given time t, i.e. number of employeesin each status group.

P is the matrix of transition probabilities between each of status groups.

r is the vector of probabilities of a recruit starting in particular statusgroups.

R(t) is the number of new recruits at time t.

If the number of employees n (t) in each status group at a particular time isknown, the equation may be used to predict the value of n (t), i.e., number ofemployees in each status group at a later time t. This is, however, subject tothe conditions that recruitment levels, i.e., R (t) during the period, i.e., t = 0 tot = T, are already known or specified. Alternatively, the total number of staffin the system, which is N (t) may be specified. The prediction equation,therefore, may be rewritten in the following form.

n (t + 1) = n (t) q + m (t + 1) r

This is the more usual form of the Markov chain model than the earlier one.Here, M (t +1) = N (t+1) and includes not only transition within the organisationbut also the effects of wastage and recruitment to maintain the balance in theorganisation. HRP using Markov Chain is considered mere probabilistic.Moreover, Markov models allow too much fluctuations of the sizes of thestatus group, while in practice sizes are tightly constrained. To avoid suchproblems the renewal theory of HRP was developed.

The FirmSources of Inflows

l Transfers

l Promotions

l New Recruits

l Promotions

l Quits

l Terminations

l Retirements

l Deaths

Employees In

Employees Out

Currentstaffing

Projectedoutflows

Projectedinflows

Firm’s internalsupply for this– + =

Projected Outflows

Current Staffing

52


Figure 5.2: Estimated Internal Labour Supply for a given Firm

iii. Skills inventory: A skills inventory is an assessment of the knowledge, skills,abilities, experience and career aspirations of each of the current employees.This record should be updated at least every 2 years and should include changessuch as new skills, additional qualifications, changed job duties etc. Of course,confidentiality is an important issue in setting up such an inventory. Onceestablished, such a record helps an organisation to quickly match forthcomingjob openings with employee backgrounds.

Figure 5.3: An Example of a Skills Inventory

iv Replacement chart: It shows the profile of job holders department-wise andoffers a snapshot of who will replace whom if there is a job opening.(See Figure 5.4).

Name : A.K. Sen Date printed : 1-4-2004

Number : 429 Department : 41

Key words Work experience

Word Description Activity From To

Accounting Tax Supervision 1998 2000 Tax clerk ABC Company

and analysis

Book Keeping Ledger Supervision 2000 2002 Accountant XYZ Co.

Auditing Computer Analysis 2002 2003 Chief Accounts TT Bank

records Officer

Education Special Qualifications Memberships

Degree Major Year Course Date 1. AIMA

MBA Finance 1998 l DBF 1996 2. ISTD

B.Com Accounts 1995 l Risk Management 1999 3. ICA

Computer Languages Position Location HobbiesLiteracy preference choice

l Tally l French Accounting l Kolkata l Chess

l Banking Auditing l Delhi l Football

Software l Bangalore l Boating

Employees Signature __________ HR Department________

Date _______________________ Date ________________

80%

12

20%

3

6%

2

11%

4

83%

30

11%

11

66%

63

8%

8

10%

29

72%

207

2%

6

16%

46

6%

86

74%

1066

20%

288

15%

14

2003-2004 Store Asst. Store Section Dept. Sales ExitManagers Managers Heads Heds Executives

Store Managers(n = 15)

Asst. StoreManagers(n = 36)

SectionHeads(n = 94)

DepartmentalHeads(n = 288)

SalesExecutives(n = 1440)

ForecastedSupply 16 41 92 301 1072 353

53


Figure 5.4: An Executive Replacement Chart

2. External labour supply: When the organisation grows rapidly, diversifies intonewer areas of operations (merchant banking, capital market operations, mutualfunds, etc. in the case of a bank) or when it is not able to find the people internallyto fill the vacancies, it has to look into outside sources. To the extent an organisationis able to anticipate its outside recruitment needs and looks into the possible sourcesof supply keeping the market trends in mind, its problem in finding the right personnelwith appropriate skills at the required time would become easier. (see Box 5.4)

Organisations, nowadays, do not generally track the qualifications of thousands ofemployees manually. Details of employees in terms of knowledge, skills, experience,abilities etc., are computerised, using various packaged software systems.[There are over 300 computerised human resource informations systems nowavailable].

Box 5.4: Important Barometers of Labour Supply

1. Net migration into and out of the area2. Education levels of workforce3. Demographic changes in population4. Technological developments and shifts5. Population Mobility6. Demand for specific skills7. National, regional unemployment rates8. Actions of competing employers9. Government policies, regulations, pressures10. Economic Forecasts for the next few years11. The attractiveness of an area12. The attractiveness of an industry in a particular place

5.3.4 Determining Manpower Gaps

The existing number of personnel and their skills (from human resource inventory) arecompared with the forecasted manpower needs (demand forecasting) to determine thequantitative and qualitative gaps in the workforce. A reconciliation of demand and supplyforecasts will give us the number of people to be recruited or made redundant as thecase may be. This forms the basis for preparing the HR plan. Box 5.5 shows howdemand and supply forecasts can be related over a period of three years.

General ManagerV. K. Garg

A/2

Key

Names given are replacementcandidatesA. Promotable nowB. Needing developmentC. Not suitable to position1. Superior performance2. Above Average performance3. Acceptable performance4. Poor performance

P A toGeneral Manager

L. MathewsB/1

Assistant General Manager R.K. Arora A/2 B.K. Nehru B/3

Division:HR Manager

C.P. Thakur A/1

Division:Accounting &

Taxation Manager A.T. Roy C/2

Division:Planning Manager

A.N. Gupta A/1 K.P. Rao B/1

Technical Advisor N.R. Murthy B/3

Northern RegionManager

L.C. Srivatsav A/2A. Thapar C/4

Central RegionManager

S.P. Kumar A/1 R. Pandey B/3

Southern RegionManager

A. Subramanyam B/2 B.K. Menon B/1

Eastern RegionManager

R. Krishna B/3

54

Human Resource Management Box 5.5: Determining Human Resource RequirementsYear

1 2 31. Number required at the beginning of the year2. Changes to requirements forecast during the year DEMAND3. Total requirements at the end of the year (1+2) -------------4. Number available at the beginning of the year5. Additions (transfers, promotions) SUPPLY6. Separations (retirement, wastage, promotions out and other losses)7. Total available at the end of year (4+5+6) --------------------8. Deficit or surplus (3-7) RECONCILIATION9. Losses of those recruited during the year OF THE ABOVE10. Additional numbers needed during the year (8+9) MANPOWER NEEDED

5.3.5 Formulating HR Plans

Organisations operate in a changing environment. Consequently, Human resourcerequirements also change continually. Changes in product mix, union agreements,competitive actions are some of the important things that need special attention.The human resource requirements identified along the procedure outlined in the abovebox need to be translated into a concrete HR plan, backed up by detailed policies,programmes and strategies (for recruitment, selection, training, promotion, retirement,replacement, etc.).

i. Recruitment plan: Will indicate the number and type of people required and whenthey are needed; special plans to recruit right people and how they are to be dealtwith via the recruitment programme.

ii. Redeployment plan: Will indicate the programmes for transferring or retrainingexisting employees for new jobs.

iii. Redundancy plan: Will indicate who is redundant, when and where; the plans forretraining, where this is possible; and plans for golden handshake, retrenchment,lay-off, etc.

iv. Training plan: Will indicate the number of trainees or apprentices required andthe programme for recruiting or training them; existing staff requiring training orretraining; new courses to be developed or changes to be effected in existing courses.

v. Productivity plan: Will indicate reasons for employee productivity or reducingemployee costs through work simplification studies, mechanisation, productivitybargaining; incentives and profit sharing schemes, job redesign, etc.

vi. Retention plan: Will indicate reasons for employee turnover and show strategiesto avoid wastage through compensation policies; changes in work requirementsand improvement in working conditions.

vii. Control points: The entire manpower plan be subjected to close monitoring fromtime to time. Control points be set up to find out deficiencies, periodic updating ofmanpower inventory, in the light of changing circumstances, be undertaken to removedeficiencies and develop future plans.

5.3.6 Responsibility for HRP

Top level executives are responsible for HR planning as it is one of the important factorsinfluencing the success of an organisation. The plans are usually prepared by the HumanResource Division in consultation with other corporate heads. The responsibility andaccountability for manpower aspects of various divisions is on their respective heads.They should undertake their own appraisals of future needs in such a way as to providea concrete basis for organisation-wide forecasting and planning. The Human ResourceDivision must offer counsel and advice to various divisional heads and coordinate the

55


various manpower estimates from time to time. Prof. Geisler outlined the responsibilitiesof Human Resource Department in respect of HR planning thus:

i. Assist and counsel operating managers to plan and set objectives.

ii. Collect and summarise manpower data keeping long-run objectives and broadorganisational interests in mind.

iii. Monitor and measure performance against the plan and keep top managementinformed about it.

iv. Provide proper research base for effective manpower and organisational planning.

Check Your Progress


(a) Recruitment (i) Services of steps to be posessed by anapplicant

(b) CIT (ii) Assessment of knowledge

(c) Selection (iii) Process of locating and encouragingpotential for applying for a job

(d) Skill inventory (iv) Critical incident technique

(e) Top level executives (v) Responsible for HR planning.

2. Discuss Markov analysis with suitable example.

5.4 LET US SUM UP

Recruitment is the process of locating and encouraging potential applicants to apply forexisting or anticipated job opening. The selection process is a series of steps throughwhich applicants pass. The basic purpose of having a human resource plan is to have anaccurate estimate of the number of employees required, with matching skill requirementsto meet organisational objectives. It provides information about the manner in whichexisting personnel are employed, the kind of skills required for different categories ofjobs and human resource requirements over a period of time in relation to organisationalobjectives. The basic purpose of preparing manpower inventory is to find out the sizeand quality of personnel available within the organisation to man various positions. Everyorganisaton will have two major sources of supply of manpower: internal and external.Some of the important forecasting techniques are Staffing table, Markov analysis, Skillsinventory, Replacement chart, External labour supply. Top level executives are responsiblefor HR planning as it is one of the important factors influencing the success of anorganisation. The plans are usually prepared by the Human Resource Division inconsultation with other corporate heads. The responsibility and accountability formanpower aspects of various divisions is on their respective heads.


Design and describe a recruiting process for filling openings for sales representatives jobfor a large pharmaceutical company.

56

Human Resource Management 5.6 KEYWORDS

Poor image

Preliminary Reception

Employment Tests

Cut Costs

Succession Planning

Organisational Decisions

Work force Analysis

Work load Analysis

Markov Analysis

Recruitment Plan


1. What are the different steps involved in selection process?

2. What are different employment related tests?

3. What is the basic purpose of HRP is an organisaiton?

4. What is the importance of HRP in an organisaiton?

5. What are the external challenges in the process of HRP?







PL Rao, Comprehensive Human Resource Management, Excel Books, New Delhi

LESSON

6BUILDING EMPLOYEE COMMITMENT

CONTENTS


6.1 Introduction

6.2 Characteristics of EI Environment

6.3 Employee Involvement Approaches

6.4 Key to Success of Employee Involvement

6.5 Sources, Developing and Using Application Forms

6.5.1 Job Posting

6.5.2 Sources

6.5.3 Developing and Using Application Forms

6.5.4 Weighted Application Blanks (WABs)

6.5.5 Usefulness

6.6 IT and Recruiting on the Internet

6.7 Let us Sum Up


6.9 Keywords




In this lesson we shall discuss about building employee commitment. After going throughthis lesson you will be able to:

(i) Understand importance of employee commitment and sources, developing and usingof application form.

(ii) Analyse IT and recruiting on the Internet.

6.1 INTRODUCTION

An effective productivity management process is simply not possible without thecommitment and involvement of employees at all levels. Those organisations that recognisethe role of human resources in productivity movement and appreciate the power of acommitted and involved workforce typically devote substantial resources and management

58

Human Resource Management energies toward the development of an environment to which employees can and willcontribute to performance improvement to the maximum of their capabilities. Theseefforts are typically characterised as employee involvement (EI) strategies.

Commitment is the binding of the individual to behavioural acts. In prospective view,commitment is conceived as an individuals psychological bond to the organisation orsocial system as reflected in his involvement with loyalty for and belief in the values ofthe organisation. Involvement describes a congruence between personal and organisationalgoals, i.e., “the degree to which members of a work organisation are able to satisfyimportant personal needs through their experiences with the organisation”.

6.2 CHARACTERISTICS OF EI ENVIRONMENT

i. Employee input to decisions

ii. Employee participation in problem-solving

iii. Information sharing

iv. Constructive feedback

v. Teamwork and collaboration

vi. Meaningful and challenging work

vii. Employment security

6.3 EMPLOYEE INVOLVEMENT APPROACHES

i. Human Relations Approach: The human relations approach is based on the beliefthat more satisfied employees are more productive employees. Organisationsoperating under the human relations framework utilise involvement techniques suchas suggestion schemes, survey feedback and quality circles, but do not seek toredesign jobs, change the organisation structure or transform the organisation’sculture to promote maximum employee involvement in decision making.

ii. Human Resources Approach: The key assumption here is that people are avaluable resource, capable of making significant contributions to organisationalperformance. They should be developed to increase their capabilities and, whenpeople have input to decisions, better decisions result.

iii. High Involvement Approach: High involvement systems operate under theassumption that employees are capable of making important decisions about theirwork and that maximum organisational performance results when people exerciseconsiderable control over their work activities.

High involvement organisations typically utilise profoundly different approaches to jobdesign such as autonomous work teams. They are very flat organisations, as employeesmake most of the routine, day-to-day decisions that are made by supervisors in traditionallymanaged organisations. All of the organisation’s systems, such as the reward systemand the goal-setting system, are designed to reinforce maximum employee involvementin decision-making. High involvement systems represent a radical departure fromtraditional management assumptions and thus require a great deal of managementcommitment to change.

6.4 KEY TO SUCCESS OF EMPLOYEE INVOLVEMENT

Success in the employee involvement arena requires, first and foremost, a recognition bytop management that participative management means cultural change which, requiresmanagement commitment and a long-term perspective.

59

Building EmployeeCommitment

i. Management Commitment: People resist change, as it requires behaviours andresponses that are not familiar. Management commitment to change must beapparent and unambiguous, if this resistance is to be overcome. Management mustbe willing to support change through the provision of resources, modification of theorganisational systems and personal involvement in the change process.

ii. Long-term View: Management must also adopt a long-term view for the changeto succeed. Attitudes and behaviours do not change overnight, and managementsdemand for quick success will heighten resistance and undermine the process.

iii. Supervisory Support: Being the buffer between the top management and non-management employees, it is upon the front-line supervisor that the greatestpressures in EI effort fall. He is called upon to transform his familiar and comfortablestyle, yet he lacks the knowledge and skills to do so. If his needs are not attendedto, there is a strong likelihood that he will resist.

Since supervisory support is such an essential ingredient to this process, they mustbe educated about EI; they must understand what it is, why it is needed, their newroles and how they will be supported. The resistance of supervisors can be furtherreduced by involving them in planning and managing the EI process. Their input inthe plan and its ongoing execution will provide them with a sense of ownership andcontrol and a better plan will probably result.

To be effective, the supervisor must also be provided with the needed skills such asgroup leadership, active listening, communications, providing feedback and problemsolving through training, coaching and reinforcement.

iv. Union Support: If the Union, as an institution, is not involved in the employeeinvolvement initiative, they may well resist the effort. Awareness programmesshould also be conducted for them covering the business scenario, status ofthe organisation, need of EI, management plans etc, so that they alsounderstand, appreciate and extend necessary support for the success of theEI programme.

v. Training and Development: Awareness training must be conducted at all levelsin the organisation. Managers and supervisors must appreciate that participativemanagement represents a major change from the traditional styles of management.For them to embrace this change, they must understand the nature, rationale andimplications of participative management. Training in problem solving must also beprovided to equip the employees and supervisors / managers with the skills toanalyse problems and to develop solutions.

vi. Strategy: Employee involvement requires a well-developed strategy to achievelong-term success. EI challenges long-held beliefs and impacts broad areas oforganisational functioning. Changing management style is probably the most difficultand frustrating task facing the chief executive who desires to institutionalise the EIprocess for performance improvement in the organisation. An intelligent, long-term strategy is, therefore, a vital ingredient for success.

6.5 SOURCES, DEVELOPING AND USING APPLICATIONFORMS

Many organisations prefer to fill vacancies through promotions or transfers from withinwherever possible. Promotion involves movement of an employee from a lower levelposition to a higher level position accompanied by (usually) changes in duties,responsibilities, status and value. The Tatas, the Birlas and most multinationals (e.g.HLL's Lister programme tracking star performers at an early stage and offeringstimulating opportunities to grow vertically) have fast-track promotion systems in place.

60

Human Resource Management The credo now is reward performance, but promote competency. In the recent past, theAV Birla group has placed over 200 people through the fast-tracker system (promotingstar performers quickly). A transfer, on the other hand, involves lateral movement withinthe same grade, from one job to another. It may lead to changes in duties and responsibilities,working conditions, etc., but not necessarily salary. Internal promotions and transferscertainly allow people greater scope to experiment with their careers, kindling ambitionsand motivating them to take a shot at something they might otherwise never haveconsidered. The system, of course, works best for young executives who are willing totake risks.

6.5.1 Job Posting

Job posting is another way of hiring people from within. In this method, the organisationpublicises job openings on bulletin boards, electronic media and similar outlets. HindustanLever introduced its version of open job postings in early 2002 and over 40 positionshave since been filled through the process. HLL even allows its employees to undertakecareer shifts, for example from technical positions to non-technical jobs such as marketing,market research etc., through the open job posting system. The AV Birla group allowsits employees an opportunity to apply not just for jobs within their own companies, but forjobs in any company in the Birla group both in India and abroad.

6.5.2 Sources

External sources lie outside an organisation. Here the organisation can have the servicesof: (a) Employees working in other organisations; (b) Job aspirants registered withemployment exchanges; (c) Students from reputed educational institutions; (d) Candidatesreferred by unions, friends, relatives and existing employees; (e) Candidates forwardedby search firms and contractors; (f) Candidates responding to the advertisements, issuedby the organisation; and (g) Unsolicited applications/walk-ins.

The merits and demerits of recruiting candidates from outside an organisation may bestated thus:

Box 6.1: Merits and Demerits of External Sources of Recruitment

6.5.3 Developing and Using Application Forms

Application blank or form is one of the most common methods used to collect informationon various aspects of the applicants’ academic, social, demographic, work-relatedbackground and references. It is a brief history sheet of an employee’s background,usually containing the following things:

Merits

Wide choice: The organisation has the freedom toselect candidates from a large pool. Persons withrequisite qualifications could be picked up.

Injection of fresh blood: People with special skillsand knowledge could be hired to stir up the existingemployees and pave the way for innovative waysof working.

Motivational force: It helps in motivating internalemployees to work hard and compete with externalcandidates while seeking career growth. Such acompetitive atmosphere would help an employeeto work to the best of his abilities.

Long term benefits: Talented people could jointhe ranks, new ideas could find meaningfulexpression, a competitive atmosphere wouldcompel people to give of their best and earnrewards, etc.

Demerits

Expensive: Hiring costs could go up substantially.Tapping multifarious sources of recruitment is notan easy task, either.

Time consuming : It takes time to advertise, screen,to test and to select suitable employees. Wheresuitable ones are not available, the process has tobe repeated.

Demotivating: Existing employees who have putin considerable service may resist the process offilling up vacancies from outside. The feeling thattheir services have not been recognised by theorganisation, forces them to work with lessenthusiasm and motivation.

Uncertainty: There is no guarantee that theorganisation, ultimately, will be able to hire theservices of suitable candidates. It may end up hiringsomeone who does not ‘fit’ and who may not beable to adjust in the new set-up.

61


i. Personal data (address, sex, identification marks)

ii. Marital data (single or married, children, dependents)

iii. Physical data (height, weight, health condition)

iv. Educational data (levels of formal education, marks, distinctions)

v. Employment data (past experience, promotions, nature of duties, reasons for leavingprevious jobs, salary drawn, etc.)

vi. Extra-curricular activities data (sports/games, NSS, NCC, prizes won, leisure-timeactivities)

vii. References (names of two or more people who certify the suitability of an applicantto the advertised position)

Even when applicants come armed with elaborate resumes, it is important to ask theapplicants to translate specific resume material into a standardised application form. Jobseekers tend to exaggerate, or overstate their qualifications on a resume. So it's alwaysbetter to ask the applicant to sign a statement that the information contained on theresume or application blank is true and that he or she accepts the employer's right toterminate the candidate's employment if any of the information is found to be false at alater date.

6.5.4 Weighted Application Blanks (WABs)

To make the application form more job-related, some organisations assign numeric valuesor weights to responses provided by applicants. Generally, the items that have a strongrelationship to job performance are given high scores. For example, for a medicalrepresentative’s position, items such as previous selling experience, marital status, age,commission earned on sales previously, etc., may be given high scores when comparedto other items such as religion, sex, language, place of birth, etc. The total score of eachapplicant is obtained by summing the weights of the individual item responses. Theresulting scores are then used in the selection decision. The WAB is best suited for jobswhere there are many workers, especially for sales and technical jobs and it is particularlyuseful in reducing turnover. There are, however, several problems associated with WABs.It takes time to develop such a form. The cost of developing a WAB could be prohibitiveif the organisation has several operating levels with unique features. The WAB must be“updated every few years to ensure that the factors previously identified are still validpredictors of job success”. And finally, the organisation should be careful not to dependon weights of a few items while selecting an employee.

6.5.5 Usefulness

Application blank is a highly useful selection tool, in that it serves three important purposes:

1. It introduces the candidate to the company in a formal way.

2. It helps the company to have a cross-comparison of applicants; the company canscreen and reject candidates if they fail to meet the eligibility criteria at this stageitself.

3. It can serve as a basis for initiating a dialogue at the interview.

Box 6.2: Sample Application Blank

Name: _________________________________________________________________________Address:_______________________________________________________________________Phone Number (Res): _______________________

Contd....

62

Human Resource Management EducationCollege/University Attended: ___________ Highest Degree (a) BA/BSc/MA/MSc/MBA/MCom

(b) BE/BTech/ MTech(c) Any other

High School Attended: ____________________________Work Experience (List most recent jobs first)Name of the Organisation:Gross Salary: _______________ (annual; be sure to include any bonuses or commission earned)Job Title: _______________________________________________________Name of Last Supervisor: __________________________________________May we contact this supervisor? Yes / NoReason(s) for Leaving: ____________________________________________________________

Name of Organisation: ____________________ Date of Employment: ______ from to ____Gross Salary: ____________ (annual; be sure to include any bonuses or commission earned)Job Title: _______________________________________________________Name of Last Supervisor: __________________________________________May we contact this supervisor? Yes / NoReason(s) for Leaving: ____________________________________________________________

Name of Organisation: ____________________ Date of Employment: ______ from to ____Gross Salary: ____________ (annual; be sure to include any bonuses or commission earned)Job Title: _______________________________________________________Name of Last Supervisor: __________________________________________May we contact this supervisor? Yes / NoReason(s) for Leaving: ____________________________________________________________

Work skills

1. List any job-related languages you are able to speak or write: _________________________2. List any job-related clerical (e.g., typing) or technical skills (e.g., computer programming) that you

have:A. ___________________________________ B. ___________________________________C. ___________________________________

Additional Information

In case of an emergency, please contact.Name: _________________________________________Address:_______________________________________Telephone: ______________________________________

I understand that falsification of information is grounds for dismissal.I understand that my employment at the company may be discontinued at any time for any reason eitherby myself or by the company.I agree to submit to a drug and/or alcohol test as a condition of employment.

Signature Date

6.6 IT AND RECRUITING ON THE INTERNET

In recent years most companies have found it useful to develop their own website andlist job openings on it. The website offers a fast, convenient and cost effective means forjob applicants to submit their resume through the Internet. Infosys Technologies Ltd., forexample, gets over 1000 resumes a day from prospective candidates through the Net.The resumes are then converted into a standard format using the software that thecompany has developed for short listing candidates according to a set criteria such asalma mater, qualifications, experience etc. The HR manager has to key in his or herrequirement and 'profiles' of candidates from the company's database get generated.9

There are a variety of websites available – in addition to a company's own website –

63


where applicants can submit their resumes and potential employers can check for qualifiedapplicants. (such as (i) www.jobsahead.com (ii) www.headhunters.com(iii) www.naukri.com (iv) www.monsterindia.com (v) www.mafoi.com(vi) www.abcconsultants.net (vii) www.datamaticsstaffing.com (viii) www.timesjobs.cometc.) Internet recruiting, as mentioned earlier, generates fast, cost-effective, timelyresponses from job applicants from different parts of the world. And that's where theproblem lies: the website might be flooded with resumes from unqualified job seekers.Applications may also come from geographic areas that are unrealistically far away.

Check Your Progress

Fill in the blanks:

1. ................. is based on the belief that the more satisfied employees are moreproductive employees.

2. Awareness training must be conducted at all levels in the .................

3. Employee involvement requires a ................. to achieve long-term success.

4. Job posting is another way of ................. people from within.

6.7 LET US SUM UP

An effective productivity management process is simply not possible without thecommitment and involvement of employees at all levels. Commitment is the binding ofthe individual to behavioural acts. In prospective view, commitment is conceived as anindividuals psychological bond to the organisation or social system as reflected in hisinvolvement with loyalty for and belief in the values of the organisation. Success in theemployee involvement arena requires, first and foremost, a recognition by top managementthat participative management means cultural change which, requires managementcommitment and a long-term perspective. Many organisations prefer to fill vacanciesthrough promotions or transfers from within wherever possible. Promotion involvesmovement of an employee from a lower level position to a higher level position accompaniedby (usually) changes in duties, responsibilities, status and value. Job posting is anotherway of hiring people from within. In recent years most companies have found it useful todevelop their own website and list job openings on it. The website offers a fast, convenientand cost effective means for job applicants to submit their resume through the Internet.There are a variety of websites available – in addition to a company's own website –where applicants can submit their resumes and potential employers can check for qualifiedapplicants. (such as (i) www.jobsahead.com (ii) www.headhunters.com(iii) www.naukri.com (iv) www.monsterindia.com (v) www.mafoi.com(vi) www.abcconsultants.net (vii) www.datamaticsstaffing.com (viii) www.timesjobs.cometc.)


Consider the scenario: you have a vacancy which you know can be filled internally bya suitable candidate related to the Managing Director. Is it ethical to try to encourage thecandidate to apply and if so, how would you go about doing so?

6.9 KEYWORDS

Management Commitment

Long-term View

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Human Resource Management Supervisory Support

Union Support

Strategy

Job Posting

WABs Selection


1. What are the characteristics of Employee input environment?

2. What are the merits of Application blank?








LESSON

7EMPLOYEE TESTING AND SELECTION

CONTENTS


7.1 Introduction

7.2 Selection Process

7.2.1 Basic Testing Concepts

7.2.2 Types of Test

7.2.3 Evaluation of Assessment Centre Technique

7.2.4 Work Sampling Tests

7.3 Simulation

7.3.1 Monte Carlo Simulation

7.3.2 Advantages and Disadvantages of Simulation

7.3.3 Selection Techniques

7.3.4 Interview

7.3.5 Types of Interviews

7.3.6 Common Interviewing Mistakes

7.3.7 Designing & Conducting the Effective Interview

7.4 Small Business Application

7.4.1 Computer Aided Interview

7.5 Let us Sum Up


7.7 Keywords




In this lesson we shall discuss about employee testing and selection. After studying thislesson you will be able to:

(i) Understand selection process and simulation.

(ii) Analyse small business application.

66

Human Resource Management 7.1 INTRODUCTION

To select means to choose. Selection is the process of picking individuals who haverelevant qualifications to fill jobs in an organisation. The basic purpose is to choose theindividual who can most successfully perform the job, from the pool of qualified candidates.

7.2 SELECTION PROCESS

The selection process is a series of steps through which applicants pass.

1. Preliminary Reception: Selection starts with a visit to the HRM office or with awritten request for an application. If an applicant appears in person, an impromptupreliminary interview may be granted as a courtesy, simply as a matter of goodpublic relations.

2. Employment Tests: Employment tests are devices that assess the probable matchbetween applicants and job requirements. When tests are used for these positions,however, they often are a simulation of real-life situations.

i. Test Validation : For a test to be relied upon, it should be valid. Validity meansthat the test scores have a significant correlation to job performance or tosome other relevant criterion.

ii. Testing Tools : There is a wide variety of employment tests. But each type oftest has only limited usefulness. The exact purpose of a test, its design, itsdirection for administration and its applications are recorded in the test manual,which should be reviewed before a test is used.

7.2.1 Basic Testing Concepts

Another important decision in the selection process involves applicant testing and thekinds of tests to use. A test is a standardised, objective measure of a person’s behaviour,performance or attitude. It is standardised because the way the test is carried out, theenvironment in which the test is administered and the way the individual scores arecalculated – are uniformly applied. It is objective in that it tries to measure individualdifferences in a scientific way, giving very little room for individual bias and interpretation.

Over the years, employment tests have not only gained importance but also a certainamount of inevitability in employment decisions. Since they try to objectively determinehow well an applicant meets job requirements, most companies do not hesitate to investtheir time and money in selection testing in a big way. Some of the commonly usedemployment tests may be stated thus:

7.2.2 Types of Test

1. Intelligence tests: These are mental ability tests. They measure the incumbent’slearning ability and also the ability to understand instructions and make judgements.The basic objective of intelligence tests is to pick up employees who are alert andquick at learning things so that they can be offered adequate training to improvetheir skills for the benefit of the organisation. Intelligence tests do not measure anysingle trait, but rather several abilities such as memory, vocabulary, verbal fluency,numerical ability, perception, spatial visualisation, etc., Stanford-Binet test, Binet-Simon test, The Wechsler Adult Intelligence Scale are examples of standardintelligence tests. Some of these tests are increasingly used in competitiveexaminations while recruiting graduates and post-graduates at entry levelmanagement positions in Banking, Insurance and other Financial Services sectors.

2. Aptitude tests: Aptitude tests measure an individual’s potential to learn certainskills – clerical, mechanical, mathematical, etc. These tests indicate whether or not

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Employee Testingand Selection

an individual has the ability to learn a given job quickly and efficiently. In order torecruit efficient office staff, aptitude tests are necessary. Clerical tests, for example,may measure the incumbent’s ability to take notes, perceive things correctly andquickly locate things, ensure proper movement of files, etc. Aptitude tests,unfortunately, do not measure on-the-job motivation. That is why the aptitude testis administered in combination with other tests, like intelligence and personalitytests.

3. Personality tests: Of all the tests required for selection, personality tests havegenerated lot of heat and controversy. The definition of personality, methods ofmeasuring personality factors and the relationship between personality factors andactual job criteria have been the subject of much discussion. Researchers havealso questioned whether applicants answer all the items truthfully or whether theytry to respond in a socially desirable manner. Regardless of these objections, manypeople still consider personality as an important component of job success.

Personality tests are used to measure basic aspects of an applicant’s personalitysuch as motivation, emotional balance, self-confidence, interpersonal behaviour,introversion, etc. The most frequently used tests are the Minnesota MultiphasicPersonality Inventory (MMPL), the California Psychological Inventory, the ManifestAnxiety Scale, Edwards Personal Performance Schedule, etc. Some of the itemsin personality inventory run thus:

Box 7.1True/False

Evil spirits possess me at times __________

I believe I am being followed __________

I am fascinated by fire __________

I have never indulged in any unusual sex practices __________

I am a special agent of God __________

I day-dream very little __________

There are three types of PIP tests: projective (personality), interests and preferences.Let’s examine these in detail:

i. Projective tests: These tests expect the candidates to interpret problems orsituations based on their own motives, attitudes, values, etc. Many personalitytests are projective in nature. A picture is presented to the person taking thetest who is then asked to interpret or react to it. Since the pictures are clouded,the person’s interpretation must come from inside – and thus get projected.The person supposedly projects into the picture his or her own emotionalattitudes, motives, frustrations, aspirations and ideas about life. Standard testsare also frequently used to assess the personality of the testee. For example,in the Thematic Appreciation Test, the testee is shown a picture and is askedto make up a story based on the picture. The responses are analysed and aprofile of personality is developed. However, projective tests have been underattack since they are unscientific and often reveal the bias of the test evaluator,particularly if he is not properly trained.

ii. Interest tests: These are meant to find how a person in tests compare withthe interests of successful people in a specific job. These tests show theareas of work in which a person is most interested. The basic idea behind theuse of interests tests is that people are most likely to be successful in jobsthey like. These tests could be used as effective selections tools. Obviously if

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Human Resource Management you can select people whose interests are roughly the same as those ofsuccessful investments by using, say the Strong-Campbell inventory, in thejobs for which you are recruiting, it is more likely that the applicants will bemore successful in their new jobs. The chief problem with using the interesttests for selection purposes is that responses to the questions are not alwayssincere.

iii. Preference tests: These tests try to compare employee preferences with thejob and organisational requirements. The job diagnostic survey developed byHackman and Oldham, is an example of a preference test. This test showshow people differ in their preferences for achievement, meaningfulness,discretion etc., in their jobs.

4. Achievement tests: These are designed to measure what the applicant can do onthe job currently, i.e., whether the testee actually knows what he or she claims toknow. A typing test shows typing proficiency, a shorthand test measures the testee’sability to take dictation and transcribe, etc. Such proficiency tests are also knownas work sampling tests. Work sampling is a selection test wherein the job applicant’sability to do a small portion of the job is tested. These tests are of two types; Motor,involving physical manipulation of things (e.g., trade tests for carpenters, plumbers,electricians) or Verbal, involving problem situations that are primarily language-oriented or people-oriented (e.g., situational tests for supervisory jobs).

Since work samples are miniature replicas of actual job requirements, they aredifficult to fake. They offer concrete evidence of the proficiency of an applicant asagainst his ability to do the job. However, work-sample tests are not cost effective,as each candidate has to be tested individually. It is not easy to develop worksamples for each job. Moreover, it is not applicable to all levels of the organisation.For managerial jobs it is often not possible to develop a work sample test that cantake one of all the full range of managerial abilities.

5. Simulation tests: Simulation exercise is a test which duplicates many of the activitiesand problems an employee faces while at work. Such exercises are commonlyused for hiring managers at various levels in an organisation. To assess the potentialof a candidate for managerial positions, assessment centres are commonly used.

6. Assessment centre: An assessment centre is an extended work sample. It usesprocedures that incorporate group and individual exercises. These exercises aredesigned to simulate the type of work which the candidate will be expected to do.Initially a small batch of applicants come to the assessment centre (a separateroom). Their performance in the situational exercises is observed and evaluated bya team of 6 to 8 trained assessors. The assessors’ judgements on each exerciseare compiled and combined to have a summary rating for each candidate beingassessed. The assessment centre approach, thus, evaluates a candidate's potentialfor management on the basis of multiple assessment techniques, standardisedmethods of making inferences from such techniques, and pooled judgements frommultiple assessors.

Box 7.2

Work Sample Assessment Centre

l Suitable for routine, repetitive jobs with l Suitable for managerial jobs, the outcomesvisible outcomes are not behaviourally observable

l Takes a few minutes to test the applicant l Takes days to conduct various exercisesl Evaluated by one supervisor l Evaluated by a team of trained observersl Can be done on location where the applicant l Requires a separate facility. The centres are

conductedl Performs a small segment of the job l For a variety of task segments (that may not

be the real job) that may be included in the realjob

l Usually completed on one applicant at a timel Usually performed on groups of applicants atthe same time

69


Initially a small batch of applicants come to the assessment centre (a separateroom). Examples of the simulated exercises based on real-life, included in a typicalassessment centre are as follows:

i. The in-basket: Here the candidate is faced with an accumulation of reports,memos, letters and other materials collected in the in-basket of the simulatedjob he is supposed to take over. The candidate is asked to take necessaryaction within a limited amount of time on each of these materials, say, bywriting letters, notes, agendas for meetings, etc. The results of the applicant’sactions are then reviewed by the evaluators. In-baskets are typically designedto measure oral, and written communication skills, planning, decisiveness,initiative and organisation skills.

ii. The leaderless group discussion (LGD): This exercise involves groups ofmanagerial candidates working together on a job-related problem. The problemis generally designed to be as realistic as possible and is tackled usually ingroups of five or six candidates. A leader is not designated for the group, butone usually emerges in the course of the group interaction. Two or moreassessors typically observe the interaction as the group tries to reach consensuson a given problem. The LGD is used to assess dimensions such as oralcommunication, tolerance for stress, adaptability, self confidence, persuasiveability etc.

iii. Business games: Here participants try to solve a problem, usually as membersof two or more simulated companies that are competing in the market place.Decisions might include how to advertise and produce, how to penetrate themarket, how much to keep in stock, etc. Participants thereby exhibit planningand organisational abilities, interpersonal skills and leadership abilities. Businessgames may be simple (focussing on very specific activities) or complex modelsof complete organisational systems. They may be computer-based or manuallyoperated, rapidly programmed or flexible. In computer based games,participants typically draw up plans for an organisation to determine suchfactors as the amount of resources to allocate for advertising, product design,selling and sales effort. The participants arrive at a number of decisions, andthen the computer tells them how well they did in comparison to competingindividuals or teams. Business games have several merits: they reduce time,events that might not take place for months or years are made to occur in amatter of hours. They are realistic and competitive in nature. They also offerimmediate feedback.

iv. Individual presentations: Participants are given a limited amount of time toplan, organise and prepare a presentation on an assigned topic. This exerciseis meant to assess the participant's oral communication skill, self-confidence,persuasive abilities, etc.

v. Structured interview: Evaluators ask a series of questions aimed at theparticipant’s level of achievement, motivation, potential for being a ‘self-starter’ and commitment to the company.

7.2.3 Evaluation of Assessment Centre Technique

The assessment centre technique has a number of advantages. The flexibility of formand content, the use of a variety of techniques, standardised ways of interpreting behaviourand pooled assessor judgements account for its acceptance as a valuable selection toolfor managerial jobs. It is praised for content validity and wide acceptance in corporate

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Human Resource Management circles. By providing a realistic job preview, the technique helps a candidate make anappropriate career choice. The performance ratings are more objective in nature andcould be readily used for promotion and career development decisions. However, themethod is expensive to design and administer. Blind acceptance of assessment datawithout considering other information on candidates (past and current performance) isalways in advisable.

i. Graphology tests: Graphology involves using a trained evaluator to examine thelines, loops, hooks, strokes, curves and flourishes in a person’s handwriting to assessthe person’s personality and emotional make-up. The recruiting company may, forexample, ask applicants to complete application forms and write about why theywant a job. These samples may be finally sent to a graphologist for analysis and theresults may be put to use while selecting a person. The use of graphology, however,is dependent on the training and expertise of the person doing the analysis. Inactual practice, questions of validity and just plain scepticism have limited its use.

ii. Polygraph (lie-detector) tests: The polygraph (The lie detector consists of a rubbertube around the chest, a cuff round the arm, and sensors attached to the fingersthat record the physiological changes in the examinee as the examiner puts questionsthat call for an answer of yes or no) records physical changes in the body as thetest subject answers a series of questions. It records fluctuations in respiration,blood pressure and perspiration on a moving roll of graph paper. The polygraphoperator forms a judgement as to whether the subject’s response was truthful ordeceptive by examining the biological movements recorded on the paper. Polygraphs,despite strong resistance by many applicants, are increasingly being used bycompanies which have problems with inventory and security of funds. Governmentagencies have begun to use the polygraph, though in a limited way, after thepassage of the Employee Polygraph Protection Act in USA in 1988, especially forfilling security, police, fire and health positions. Critics, however, question theappropriateness of polygraphs in establishing the truth about an applicant’s behaviour.The fact is that polygraph records biological reaction in response to stress and doesnot record lying or even the conditions necessarily accompanying lying. Is it possibleto prove that the responses recorded by the polygraph occur only because a lie hasbeen told? What about those situations in which a person lies without guilt (apathological liar) or lies believing the response to be true? The fact of the matter isthat polygraphs are neither reliable nor valid. Since they invade the privacy ofthose tested, many applicants vehemently oppose the use of polygraph as a selectiontool.

iii. Integrity tests: These are designed to measure employee’s honesty to predictthose who are more likely to steal from an employer or otherwise act in a mannerunacceptable to the organisation. The applicants who take these tests are expectedto answer several ‘yes’ or ‘no’ type questions, such as:

Box 7.3Typical Integrity Questions Yes/No

l Have you ever told a lie?

l Do you report to your boss if you know of another employeestealing from the store?

l Do you carry office stationery back to your home for occasional use?

l Do you mark attendance for your colleagues also?

Often these tests contain questions that repeat themselves in some way and theevaluator then examines the consistency in responses. Companies that have usedintegrity tests have reported success in tracking employees who indulge in ‘theft’.However, these tests ultimately suffer from the same weaknesses as polygraphand graphology tests.

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7.2.4 Work Sampling Tests

A work sampling test requires the applicant actually do a sample of the work that the jobinvolves in a controlled situation. Examples of work sampling tests include:

i. Programming test for computer programmers.

ii. Standard driving course for deliver persons.

iii. Standardized typing, work processing, or spreadsheet applications problems forsecretarial and clerical help.

iv. Auditions used by a symphony orchestra or balled company.

v. Stimulated "in basket" tests for managers. A standardized set of memos, requests,and so on, is given to the applicant, who must dispense with them as she or hewould if the work were real.

Variations of these work sampling tests are used in many organizations. Applicants arefrequently asked to run the machines they would run if they got the job. Then the quantityand quality of their work are systematically graded and compared with the work of otherapplicants.

Over a large number of selection situations, work sampling tests have demonstratedsome of the highest validities of all selection tests. The presumed superiority of thesetests over other types of selection tools lies in their direct and obvious relationship withperformance of the job. However, for this relationship to actually exist, the content of thejob must be well documented through job analyses. Care must be taken not to confuseface validity with actual validity. Face validity is how good a test looks for a givensituation. Many test that are valid also look valid, but that is not always the case. Sometimesa test that appears to have no logical relationships to a particular job may prove to be avalid predictor of performance on that job. Nonetheless, job sample tests are a provenmethod of selection in many organizations.

7.3 SIMULATION

To simulate is to initiate. In general terms, simulation involves developing a model ofsome real phenomenon and then performing experiments on the model evolved. It is adescriptive, and not an optimizing, technique. In simulation, a given system is copied andthe variables and constants associated with it are manipulated in an artificial environmentto examine the behaviour of the system. Using simulation, an analyst can introduce theconstants and variables related to the problem, set up the possible courses of action andestablish criteria, which act as measures of effectiveness. The benefit of simulationfrom the view point of the analyst stems from the fact that the results of taking a particularcourse of action can be estimated prior to its implementation in the real world. Instead ofusing hunches and intuition to determine what may happen, the analyst using simulationcan test and evaluate various alternatives and select the one that gives the best results.

Broadly, there are four phases of the simulation process. They are:

a. Definition of the problem and statement of objectives.

b. Construction of an appropriate model.

c. Experimentation with the model constructed, and

d. Evaluation of the results of simulation.

7.3.1 Monte Carlo Simulation

It is also known as probabilistic simulation method. It can be described as a numericaltechnique that involves modeling with the objectives of predicting the system's behaviour.The chance element is a very significant feature of Monte Carlo simulation and thisapproach can be used when the given process has a random, or chance component.

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Human Resource Management Illustration

A hotel keeps a record of the number of staff requirement of various categories.Information relating to 200 days' requirement are as under:

Demand Total

No. of staff 5 6 7 8 9 10 11 12

No. of days 4 10 16 50 62 38 12 8 200

Develop a simulation model to predict the demand of staff for a 10-day period.

Solution

Firstly, derive the probability distribution of demand for the staff, expressing each of thefrequencies in terms of proportions. This is done by dividing each of the values by 200,i.e. the total frequency. The resultant distribution would, therefore, be as follows:

No. of staff 5 6 7 8 9 10 11 12

No. of days .02 .05 .08 .25 .31 .19 .06 .04

Secondly, determine random numbers using any mechanism of random number generator.There are various ways in which random numbers can be generated. These could beresult of some device like coin or die, published table of random numbers, etc. However,the most convenient method is to make use of the published table of random numbers,published by the Rand Corporation of USA.

An assignment has to be worked out so that the interval of random numbers correspondto the probability distribution. Since the probabilities have been calculated to two decimalplaces, which add upto 1.00, we need 100 numbers of two digits to represent each pointof probability. Thus we take random numbers 00 through 99 to represent them. Now, asthe probability of 5 staff is equal to .02, we assign two random numbers 00-01 to thisdemand level; the probability of 6 staff being equal to .05, the next five numbers, 02-06would be assigned to this level. In a similar manner each of the demand levels would beassigned appropriate intervals as under:

Demand Probability Cumulative Random number(No. of staff) probability interval

5 .02 .02 00-01

6 .05 .07 02-06

7 .08 .15 07-14

8 .25 .40 15-39

9 .31 .71 40-70

10 .19 .90 71-89

11 .06 .96 90-95

12 .04 1.00 96-99

The Cumulative probabilities column analyses the assigned numbers to correspond tothe same probability range for each event.

Thirdly, once the random number intervals are determined, we select a tracking patternfor drawing random numbers from the random number table. We may start with anycolumn and row of the table and read the values in any set manner – horizontally, verticallyor diagonally. Using the pattern, we draw the random numbers and match them with theassigned events.

Let us assume for the purpose of this problem, we have decided to take every third valuehorizontally, starting with the fifth column and fourth row of the table of random numbers.The random numbers, according to this pattern are 61, 74, 24, 03, 59, 16, 84, 92, 52,07…….. etc. (for 10-day demand period). We draw as many random numbers as thenumber of days' demand required to be simulated.

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The first number, i.e. 61, lies in the interval 40-70. Corresponding to the demand level of9 staff. Thus, the simulated demand for the first day is 9 staff members. In a similarmanner, we can obtain the demand for each of the day. For the 10-day period, we havethe following demand:

Day 1 2 3 4 5 6 7 8 9 10

Number 61 74 24 03 59 16 84 92 52 07

Demand of staff 9 10 8 6 9 8 10 11 9 7

Exercise

A caterer keeps on reserve cooks during marriage season. Previous experience indicatesthe daily demand of cooks is as under:

Daily demand 0 10 20 30 40 50

Probability .01 .20 .15 .50 .12 .02

Consider the following sequence of random numbers:

48, 78, 19, 51, 56, 77, 15, 14, 68, 09

Using this sequence, simulate the demand for the next 10 days. Find out the reservesituation if the owner of the caterer decides to maintain on payroll 30 cooks everyday.Also estimate the daily average demand for the cooks on the basis of simulated data.

Solution

Demand Probability Cumulative Random number(No. of staff) probability interval

0 0.01 0.01 00

10 0.20 0.21 01-20

20 0.15 0.36 21-35

30 0.50 0.86 36-85

40 0.12 0.98 86-97

50 0.02 1.00 98-99

The simulated demand for the cooks for the next 10 days and the stock position forvarious days when the decision is to make available 30 cooks a day, would be as under:

Determination of Demand and Stock levels

Day Random number Demand Stock

1 48 30 –

2 78 30 –

3 19 10 20

4 51 30 20

5 56 30 20

6 77 30 20

7 15 10 40

8 14 10 60

9 68 30 60

10 09 10 80

Expected demand = 220/10 = 22 cooks per day.

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Interview Evaluation FormPOST: NAME OF THE CANDIDATE:

0 1 2 3 4

Weightage Description Not Below Average GoodOutstanding

acceptable average

2. a. Appearance & attitude,courtesy & dress

4. b. Experience (for post)

2. c. Communication (abilityto express himself)

3. d. Technical competence

7.3.2 Advantages and Disadvantages of Simulation

Advantage: The chief merit of the simulation technique is its capacity to lend itself toproblems that are cumbersome, or impossible to handle mathematically using analyticalmethods. Not only this, the technique allows the analyst to experiment with the systembehaviour without subjecting it to the risks that would be inherent in experimenting withthe real system. It also compresses time to enable the manager to visualize the long-termeffects in a quick manner. Besides, simulation is often used to test proposed analyticsolutions as well.

Disadvantage: It does not represent a methodology for derivation of optimal solutionsto the given problems. This approach is designed merely to provide characterisation ofthe behaviour of the system in question for a given set of inputs. Further, the simulationapproach is not precise in the sense that it yields only estimates which are subject tosampling error. Of course, the sampling error can be reduced by increasing the samplesize.

Another drawback is that it may not prove economical, as it requires lot of efforts todevelop a suitable model.

It is a tool of solution evaluation and does not generate problem solution. Thus the analysthas to develop the proposed solution; then simulation can be used to test the relativedesirability of those solutions.

7.3.3 Selection TechniquesImmediately after the interview ends, the interviewer should record specific answersand general impressions about the candidate. Use of a checklist like one inBox 5.1 can improve the reliability of the interview as a selection technique.

7.3.4 InterviewInterview is the oral examination of candidates for employment. This is the most essentialstep in the selection process. In this step, the interviewer tries to obtain and synthesiseinformation about the abilities of the interviewee and the requirements of the job. Interviewgives the recruiter an opportunity to:

i. size up the interviewee’s agreeableness;

ii. ask questions that are not covered in tests;

iii. obtain as much pertinent information as possible;

iv. assess subjective aspects of the candidate – facial expressions, appearance,nervousness and so forth;

v. make judgements on interviewee’s enthusiasm and intelligence;

vi. give facts to the candidate regarding the company, its policies, programmes, etc.,and promote goodwill towards the company.

Box 7.4: A Post-interview Checklist

Contd....

75


2. e. Ambition in line withanticipated jobprogression

3. f. Potential (ability &motivation to grow oradvance, capable ofdeveloping)

2. g. Reasoning &judgement

(clear thinking, logicalreasoning, jumping toconclusions)

2. h. General Knowledge(information in manyfields, broadinterests, only fewsubjects)

2. i. Health (generalstaminaEnergetic/sickly)

3. j. Leadership(can head a group ofpeople to achievetarget, developsgroup for betteractivity)

25

General EvaluationSuitability & : YES / NO Time Taken:RecommendationRemarks, if any :Date: Signature of the Member

Source: Visakha Cooperative Dairy

7.3.5 Types of Interviews

Several types of interviews are commonly used depending on the nature and importanceof the position to be filled within an organisation.

i. The non-directive interview: In a non-directive interview the recruiter asksquestions as they come to mind. There is no specific format to be followed. Thequestions can take any direction. The interviewer asks broad, open-ended questionssuch as ‘tell me more about what you did on your last job’ – and allows theapplicant to talk freely with a minimum of interruption. Difficulties with a non-directive interview include keeping it job related and obtaining comparable data onvarious applicants.

ii. The directive or structured interview: In the directive interview, the recruiteruses a predetermined set of questions that are clearly job related. Since everyapplicant is asked the same basic questions, comparison among applicants can bemade more easily. Structured questions improve the reliability of the interviewprocess, eliminate biases and errors and may even enhance the ability of a companyto withstand legal challenge. On the negative side, the whole process is somewhatmechanical, restricts the freedom of interviewers and may even convey disinterestto applicants who are used to more flexible interviews. Also, designing a structuredinterview may take a good amount of time and energy.

iii. The situational interview: One variation of the structured interview is known asthe situational interview. In this approach, the applicant is confronted with a

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Human Resource Management hypothetical incident and asked how he or she would respond to it. The applicant'sresponse is then evaluated relative to pre-established benchmark standards.

iv. The behavioural interview: The behavioural interview focuses on actual workincidents (as against hypothetical situations in the situational interview) in theapplicant's past. The applicant is supposed to reveal what he or she did in a givensituation, for example, how he disciplined an employee who was smoking inside thefactory premises.

v. Stress interview: In stress interview, the interviewer attempts to find how applicantswould respond to aggressive, embarrassing, rude and insulting questions. The wholeexercise is meant to see whether the applicant can cope with highly stress-producing,anxious and demanding situations while at work, in a calm and composed manner.Such an approach may backfire also, because the typical applicant is alreadysomewhat anxious in any interview. So, the applicant that the firm wants to hiremight even turn down the job offer under such trying conditions.

vi. Panel interview : In a typical panel interview, the applicant meets with three tofive interviewers who take turns asking questions. After the interview, theinterviewers pool their observations to arrive at a consensus about the suitability ofthe applicant. The panel members can ask new and incisive questions based ontheir expertise and experience and elicit deeper and more meaningful responsesfrom candidates. Such an interview could also limit the impact of the personalbiases of any individual interviewer. On the negative side, as an applicant, a panelinterview may make you feel more stressed than usual.

7.3.6 Common Interviewing Mistakes

The interview is a good selection tool in the hands of the person who knows how to useit. If it is not used properly or the interviewer himself is not in a positive frame of mind,mistakes may occur. The interviewer, for example, may:

i. favour applicants who share his own attitudes;

ii. find it difficult to establish rapport with interviewees, because he himself does notpossess good interpersonal skills;

iii. not be asking right questions and hence not getting relevant responses;

iv. resort to snap judgements, making a decision as to the applicant’s suitability inthe first few minutes of the interview. Too often interviewers form an early impressionand spend the balance of the interview looking for evidence to support it;

v. may have forgotten much of the interview’s content within minutes after itsconclusion;

vi. may have awarded high scores by showing leniency (leniency);

vii. may have been influenced by ‘cultural noise’ . To get the job, the applicants try toget past the interviewer. If they reveal wrong things about themselves, they realisethat they may not get the job, so they try to give the interviewer responses that aresocially acceptable, but not very revealing. These types of responses are known ascultural noise – responses the applicant believes are socially acceptable ratherthan facts;

viii. may have allowed himself to be unduly influenced by associating a particularpersonality trait with a person’s origin or cultural background and that kind ofstereotyping/generalising ultimately determining the scores of a candidate(stereotyping). For example, he may feel that candidates from Bihar may find itdifficult to read, write and speak English language and hence not select them at all!

ix. may allow the ratings to be influenced by his own likes and dislikes (bias)

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x. may conclude that a poorly dressed candidate is not intelligent, attractive femalesare good for public dealings, etc. This is known as ‘halo effect’, where a singleimportant trait of a candidate affects the judgement of the rater. The halo effect ispresent if an interviewer allows a candidate’s accomplishments in athletics toovershadow other aspects and leads the interviewer to like the applicant because‘athletes make good sales people’;

xi. have rated an applicant poorly, following the interview of very favourable orunfavourable candidates (an anomaly known as candidate-order error; the orderin which you interview applicants can also affect how you rate them);

xii. have been influenced more by unfavourable than favourable information about, orfrom, the candidate. Unfavourable information is given roughly twice the weight offavourable information. According to Dobmeyer and Dunette, a single negativecharacteristic may bar an individual from being accepted, whereafter no amount ofpositive features will guarantee a candidate’s acceptance.

xiii. have been under pressure to hire candidates at short notice;

xiv. have been influenced by the behaviour of the candidates (how he has answered,his body language), his or her dress (especially in the case of female candidates)and other physical factors that are not job related.

7.3.7 Designing & Conducting the Effective Interview

Interviewing is an art. It demands a positive frame of mind on the part of the interviewers.Interviewees must be treated properly so as to leave a good impression (about thecompany) in their minds. HR experts have identified certain steps to be followed whileconducting interviews:

Evaluation

Termination

Information

Exchange

Reception

Preparation

Figure: 7.1

1. Preparation: Effective interviews do not just happen. They are planned. Thisinvolves:

i. Establishing the objectives of the interview and determining the areas andspecific questions to be covered.

ii. Reviewing the candidate’s application and resume, noting areas that are vagueor that may show candidate’s strengths and weaknesses on which questionscould be asked.

iii. Keeping the test scores ready, along with interview assessment forms.

iv. Selecting the interview method to be followed.

v. Choosing the panel of experts who would interview the candidates (list thenumber of experts to be called plus the chairman).

vi. Identifying a comfortable, private room preferably away from noise andinterruptions (neat and clean; well furnished, lighted and ventilated) wherethe interview could be held.

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Human Resource Management 2. Reception: The candidate should be properly received and led into the interviewroom. Greet the candidate with a warm, friendly, greeting smile. Names areimportant. So tell the applicant what to call you and then ask the applicant for hispreferred form of address. Tell briefly about yourself and put the applicant at easeso that he may reciprocate with personal information. Ask the applicant abouthobbies, activities or some other topic so as to break the ice. As a rule, treat allcandidates – even unsolicited drop-ins at your office – courteously, not onhumanitarian grounds but because your company’s reputation is at stake. Start theinterview on time.

3. Information Exchange: To gain the confidence of the candidate, start the interviewwith a cheerful conversation. The information exchange between the interviewerand the interviewee may proceed thus:

i. State the purpose of the interview, how the qualifications are going to bematched with skills needed to handle the job. Give information about the jobfor which the interviewee is applying. Known as a realistic job preview, suchan exercise would be most fruitful when the applicant gets a realistic pictureof what he is supposed to do on the job. A realistic job preview helps minimisesurprises for the new recruit, enhancing the comfort level and decreasingambiguity and uncertainty in the early stages of work. Also, the first impressiona firm makes on a new hire is one of being an honest organisation, that stayswith the employee, increasing the employee's level of commitment.

ii. Begin with open-ended questions where the candidate gets enough freedomto express himself freely instead of ‘yes’ or ‘no’ type of responses.

iii. Do not put words in the applicant’s mouth by asking: You have worked in aprivate management institute before. Haven’t you?

iv. Do not telegraph the desired answer by nodding or smiling when the rightanswer is given.

v. Do not interrogate the applicant as if the person is a prisoner and do not bepatronising, sarcastic or ultra-critical.

vi. Do not monopolies the conversation, giving very little chance to the applicantto reveal himself.

vii. Do not let the applicant dominate the interview by rambling from point topoint so you cannot ask all your questions. Establish an interview plan andstick to it.

viii. Do not use difficult words to confuse the applicant. Provide information asfreely and honestly as possible

Box 7.5: Common Interview Questions (R-Lathrop)

Openers

l May I see your resume?

l What can I do for you?

l Why are you interested in joining our company?

l Why do you feel that you are qualified for this job?

l What do you think you can do for us?Contd....

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l What attracts you to us?

l Tell me about your experience.

l What pay do you have in mind? (Try tactfully to avoid answering this one early in the interview).

Regarding motivation and interests

l Is your present employer aware of your interest in a job change?

l Why do you want to change jobs?

l What caused you to enter your job field?

l Why do you want to change your field of work?

l Why are you leaving military service at this point?

l What would you like to be doing five years from now? When you retire?

l What is the ideal job for you?

l If you had complete freedom of choice to be a great success in any job field, which would youchoose? Why?

Regarding education and intellectual capacity

l Describe your education for me.

l Why did you pick your major (area of specialisation)?

l What was your class standing?

l What were your activities?

l What honours/awards did you earn?

l What were your average grades?

l Did your grades adequately reflect your full capability? Why not?

l What courses did you like best/least and why?

l Have you had any special training for this job?

Regarding pay

l What do you require?

l What is the minimum pay you will accept?

l What is your pay record for the last five years?

l Why do you believe you are qualified for so much more?

l We can’t pay the salary you should have. Would you be willing to start lower and work up tothat figure?

l What do you expect to be earning five years from now?

Regarding experience

l Why should I hire you?

l How do you fit the requirements for this job?

l What did you do in military service?

l What would you do to improve our operations?

l Who has exercised the greatest influence on you? How?

l What duties performed in the past have you liked best/least and why?

l What are your greatest strengths/limitations for this job?

l What are the strongest limitations you have found in past supervisors?

l Which supervisor did you like the best and why?

l What kinds of people appeal most/least to you as work associates?

l How many people have you supervised? What types?

l What are your greatest accomplishments to date?

l What equipment can you work with?

l Why have you changed jobs so frequently?

l Have you ever been fired or asked to resign?

l Describe the biggest crisis in your career.

l What were you doing during the period not covered in your resume?

l Why were you out of work so long?

l What was the specific nature of your illness during your extended hospitalisation?

l What made you leave your previous jobs?

l Could I see samples of your work?

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Human Resource Management l Focus on the applicant’s education, training, work experience, etc. Findunexplained gaps in applicant’s past work or college record and elicit factsthat are not mentioned in the resume. Avoid questions that are not job-related.

l Listen to the applicant’s answers attentively and patiently. And pay attentionto non verbal cues (applicant's facial expressions, gestures, body language,etc.). To increase reliability and avoid discrimination, ask the same questionsof all applicants for a particular job. Keep careful notes and record facts.

4. Termination: End the interview as happily as it began without creating any awkwardsituation for the interviewee. Here, avoid communicating through unpleasant gesturessuch as sitting erect, turning towards the door, glancing at watch or clock, etc.Some interviewers terminate the show by asking: do you have any final questions?At this point inform the applicant about the next step in the interview process,which may be to wait for a call or letter. Regardless of the interview performanceof the candidate and interviewer’s personal opinion, the applicant should not begiven any indication of his prospects at this stage.

5. Evaluation: After the interview is over, summarise and record your observationscarefully, constructing the report based on responses given by applicant, his behaviour,your own observations and the opinions of other experts present during the interview.Better to use a standardised evaluation form for this purpose.

7.4 SMALL BUSINESS APPLICATION

Box 7.6: Some Applications of Employment-Related TestsPSYCHOLOGICAL TESTS

Measures personality or temperament (executives, nuclear power, security)

Measures personality or temperament (executives, managers, supervisors)

Measures personality or temperament (sales personnel)

Measures logic and reasoning ability (executives, managers, supervisors)

Measures creativity and judgement ability (engineers)

Measures personality components (managers)

KNOWLEDGE TESTS

Measures knowledge of leadership practices (managers and supervisors)

Measures verbal, spatial, numeric and other aptitudes and manual dexterity (job seekers atunemployment offices)

PERFORMANCE TESTS

Measures physical coordination (shop workers)

Measures spatial visualization (draughtsmen and draughtswomen)

Measures ability to work with numbers and names (clerks)

Measures a sample of “on-the-job” demands (managers, professionals)

GRAPHIC RESPONSE TEST

Measures physiological responses to questions (police, retail store workers)

ATTITUDE TESTS

Measures attitudes about theft and related subjects (retail workers, security personnel, bank staff).Measures attitudes about work and values (entry level, low income workers)

MEDICAL TESTS

Measures the presence of illegal or performance-affecting drugs (government employees, equipmentoperators). Identifies genetic predispositions to specific medical problems. Measures and monitorsexposure to hazardous chemicals (miners, factory workers, researchers)

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7.4.1 Computer Aided Interview

Advances in technology, coupled with increased access to the World Wide Web, arechanging the face of recruitment and selection as we know it. Apply for a graduate postwith KPMG, for example, and the first stage is an on-line self assessment test designedto help candidates decide if they match the company specifics. Shell International andMarks & Spencer are among other big names using this D.I.Y. approach to help weedout unsuitable applicants at an early stage. A growing number of organisations — Boeingand the BBC for example — actively encourage on-line application, providing a formthat can be filled in on-screen.

`Electronic’ applications of this kind are typically sifted with the help of computer softwarewhich searches for key words or phrases and singles out candidates worth investigatingfurther. Job-seekers who successfully negotiate this hurdle might subsequently findthemselves facing a more detailed, on-line assessment — perhaps in the form of a live,interactive, simulated exercise.

The use of IT in selection encourages candidates to respond more honestly and openlyto questions. Job-seekers can use material freely available on the Internet to prepare forassessment by employers. There are sites that offer a free practice run of the type ofaptitude tests and personality profiles commonly used in industry.

Psychometric tests appear to be undergoing a transformation too. An increased emphasison softer skills, such as leadership and teamwork, has led to a glut of new tests designedto find out not just where candidates are likely to excel — but also what might makethem go off the rails. In the same way creativity can lead to eccentricity, conscientiousnesscan turn into obsessive perfectionism and charm can cross the barrier into manipulation.Knowing how somebody behaves when they’re under pressure is important because ithas a direct impact on the team. Another test dreamed up by psychologists aims toassess a candidate’s integrity. Called Giotto, it is designed to reveal those traits — suchas carelessness, tardiness and intolerance — that an employer might want to avoid.

Recruitment agencies have been conducting basic aptitude and skills tests as standardprocedure for some time. But Addeco Alfred Marks has taken the concept further withits Expert testing and matching system. The system allows recruitment consultants toevaluate applicants in three core areas — skills, motivation and attitude and preferredworking environment. Under the first stage, `Can do’, applicants are tested for basicnumeracy, literacy and job-related skills. The next step, `will do’, assesses areas such asreliability, stress tolerance, motivation and energy. The final part of the evaluation, `willfit’, compares information about the employer’s working environment with details of thecandidate’s preferences. The results are then compared to ensure an optimum `fit’ forjob-seekers and employers alike.

There is now a wide menu of alternative assessment techniques that organisations canexperiment with if they feel so inclined. The interview, references and that importantfirst impression still have their place. Tests don’t do the whole job. They’re just a way ofenabling you to make your decision in the best possible light with the best availableinformation.

Check Your Progress

1. List out the keys to success of employee involvement.

2. What is WABs stands for? What are its usefulness?

3. What is simulation test?

4. Draft a restaurant advertisement for any university. Assume that universitywants to recruit manpower for position of progress or of commerce, librarianand also for administrative staff.

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Human Resource Management 7.5 LET US SUM UP

Selection is the process of picking individuals who have relevant qualifications to fill jobsin an organisation. The basic purpose is to choose the individual who can most successfullyperform the job, from the pool of qualified candidates.

The selection process is a series of steps through which applicants pass. i.e.


Employment Tests

Another important decision in the selection process involves applicant testing and thekinds of tests to use. A test is a standardised, objective measure of a person’s behaviour,performance or attitude. To simulate is to initiate. In general terms, simulation involvesdeveloping a model of some real phenomenon and then performing experiments on themodel evolved. It is a descriptive, and not an optimizing, technique. In simulation, a givensystem is copied and the variables and constants associated with it are manipulated in anartificial environment to examine the behaviour of the system. The interview is a goodselection tool in the hands of the person who knows how to use it. If it is not usedproperly or the interviewer himself is not in a positive frame of mind, mistakes mayoccur.


You work for a medium-sized software solutions company that faces intense competitionfrom local as well as global competitors. Change seems to be the only permanent featurein your workspot and each employee’s responsibilities shift from project to project.Suppose you have been asked to fill up the job openings at your company. How wouldyou identify the best people to work in such an environment?

7.7 KEYWORDS


Aptitude Test

Achievement Test

Simulation Test

Monte Carlo Simulation


1. What is testing in selection? Explain its validity and reliability in the selection process.

2. What are the different types of Interviews? Explain each.

3. If you were responsible for hiring someone for your job state “which recruitmentsources would you consider, and also which you will avoid.” Explain with reason?

4. Write notes on:

(a) Personality Tests (b) Achievement Tests

(c) Polygraph (d) Europhology

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Employee Testingand Selection7.9 SUGGESTED READINGS







Unit-III

LESSON

8ORIENTATION & TRAINING

CONTENTS


8.1 Introduction

8.2 Orienting the Employees

8.2.1 Objectives

8.3 Induction Programme: Steps

8.4 The Training Process

8.4.1 Modelling

8.4.2 Motivation

8.4.3 Reinforcement

8.4.4 Feedback

8.4.5 Spaced Practice

8.4.6 Whole Learning

8.4.7 Active Practice

8.4.8 Need Analysis

8.5 Training Techniques

8.5.1 Job Instruction Training (JIT)

8.5.2 Coaching

8.5.3 Mentoring

8.5.4 Job Rotation

8.5.5 Apprenticeship Training

8.5.6 Committee Assignments

8.6 Special Purpose Training

8.6.1 Training via Internet

8.7 Let us Sum Up

8.8 Lesson-end Activities

8.9 Keywords



8 8

Human Resource Management 8.0 AIMS AND OBJECTIVES

In this lesson we shall discuss orientation and training. After going through this lessonyou will be able to:

(i) Understand training process.

(ii) Analyse training techniques and special purpose training.

8.1 INTRODUCTION

After employees have been selected for various positions in an organisation, trainingthem for the specific tasks to which they have been assigned assumes great importance.It is true in many organisations that before an employee is fitted into a harmoniousworking relationship with other employees, he is given adequate training. Training is theact of increasing the knowledge and skills of an employee for performing a particularjob. The major outcome of training is learning.

8.2 ORIENTING THE EMPLOYEES

Orientation or induction is the task of introducing the new employees to the organisationand its policies, procedures and rules. A typical formal orientation programme may lasta day or less in most organisations. During this time, the new employee is provided withinformation about the company, its history, its current position, the benefits for which heis eligible, leave rules, rest periods, etc. Also covered are the more routine things anewcomer must learn, such as the location of the rest rooms, break rooms, parkingspaces, cafeteria, etc. In some organisations, all this is done informally by attaching newemployees to their seniors, who provide guidance on the above matters. Lectures,handbooks, films, groups, seminars are also provided to new employees so that they cansettle down quickly and resume the work.

Box 8.1: Flowers for Attending an Interview

“I came for an interview here in 2000. At that time Mind Tree Consulting (1045 employees softwareconsulting outfit with nearly $29 million global sales) had about a hundred employees,” says a SeniorConsultant. “I had not made up my mind about the company, and had a few other offers. Soon afterthe inter interview the company sent me a bouquet of flowers, thanking me for attending the interview.For me that was the ‘clincher’ – after all how many companies would do that, just for attending aninterview? [See B. World, 6.12.2004]

8.2.1 Objectives

Induction serves the following purposes:

1. Removes fears: A newcomer steps into an organisation as a stranger. He is newto the people, workplace and work environment. He is not very sure about what heis supposed to do. Induction helps a new employee overcome such fears and performbetter on the job.

i. It assists him in knowing more about:

ii. The job, its content, policies, rules and regulations.

iii. The people with whom he is supposed to interact.

iv. The terms and conditions of employment.

2. Creates a good impression: Another purpose of induction is to make the newcomerfeel at home and develop a sense of pride in the organisation. Induction helps himto:

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Orientation & Trainingi. Adjust and adapt to new demands of the job.

ii. Get along with people.

iii. Get off to a good start.

Through induction, a new recruit is able to see more clearly as to what he is supposedto do, how good the colleagues are, how important is the job, etc. He can posequestions and seek clarifications on issues relating to his job. Induction is a positivestep, in the sense, it leaves a good impression about the company and the peopleworking there in the minds of new recruits. They begin to take pride in their workand are more committed to their jobs.

3. Acts as a valuable source of information: Induction serves as a valuable sourceof information to new recruits. It classifies many things through employee manuals/handbook. Informal discussions with colleagues may also clear the fog surroundingcertain issues. The basic purpose of induction is to communicate specific jobrequirements to the employee, put him at ease and make him feel confident abouthis abilities.

8.3 INDUCTION PROGRAMME: STEPS

The HR department may initiate the following steps while organising the inductionprogramme:

i. Welcome to the organisation.

ii. Explain about the company.

iii. Show the location/department where the new recruit will work.

iv. Give the company’s manual to the new recruit.

v. Provide details about various work groups and the extent of unionism within thecompany.

vi. Give details about pay, benefits, holidays, leave, etc. Emphasise the importance ofattendance or punctuality.

vii. Explain about future training opportunities and career prospects.

viii. Clarify doubts, by encouraging the employee to come out with questions.

ix. Take the employee on a guided tour of buildings, facilities, etc. Hand him over tohis supervisor.

(a) Content: The topics covered in employee induction programme may be statedthus:

(b) Socialisation: Socialisation is a process through which a new recruit beginsto understand and accept the values, norms and beliefs held by others in theorganisation. HR department representatives help new recruits to “internalisethe way things are done in the organisation”. Orientation helps the newcomersto interact freely with employees working at various levels and learn behavioursthat are acceptable. Through such formal and informal interaction anddiscussion, newcomers begin to understand how the department/company isrun, who holds power and who does not, who is politically active within thedepartment, how to behave in the company, what is expected of them, etc. Inshort, if the new recruits wish to survive and prosper in their new work home,they must soon come to ‘know the ropes’. Orientation programmes areeffective socialisation tools because they help the employees to learn aboutthe job and perform things in a desired way.

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Human Resource Management (c) Follow up: Despite the best efforts of supervisors, certain dark areas maystill remain in the orientation programme. New hires may not have understoodcertain things. The supervisors, while covering a large ground, may haveignored certain important matters. To overcome the resultant communicationgaps, it is better to use a supervisory checklist and find out whether all aspectshave been covered or not. Follow up meetings could be held at fixed intervals,say after every three or six months on a face-to-face basis. The basic purposeof such follow up orientation is to offer guidance to employees on variousgeneral as well as job related matters without leaving anything to chance. Toimprove orientation, the company should make a conscious effort to obtainfeedback from everyone involved in the programme. There are several waysto get this kind of feedback: through round table discussions with new hiresafter their first year on the job, through in-depth interviews with randomlyselected employees and superiors and through questionnaires for masscoverage of all recent recruits.

8.4 THE TRAINING PROCESS

Training is essential for job success. It can lead to higher production, fewer mistakes,greater job satisfaction and lower turnover. These benefits accrue to both the traineeand the organisation, if managers understand the principles behind the training process.To this end, training efforts must invariably follow certain learning-oriented guidelines.

8.4.1 Modelling

Modelling is simply copying someone else’s behaviour. Passive class room learning doesnot leave any room for modelling. If we want to change people, it would be a good ideato have videotapes of people showing the desired behaviour. The selected model shouldprovide the right kind of behaviour to be copied by others. A great deal of human behaviouris learned by modelling others. Children learn by modelling parents and older children,they are quite comfortable with the process by the time they grow up. As experts put it.“managers tend to manage as they were managed!”

8.4.2 Motivation

For learning to take place, intention to learn is important. When the employee is motivated,he pays attention to what is being said, done and presented. Motivation to learn is influencedby the answers to questions such as: How important is my job to me? How important isthe information? Will learning help me progress in the company? etc. People learn morequickly when the material is important and relevant to them. Learning is usually quickerand long-lasting when the learner participates actively. Most people, for example, neverforget how to ride a bicycle because they took an active part in the learning process!

8.4.3 Reinforcement

If a behaviour is rewarded, it probably will be repeated. Positive reinforcement consistsof rewarding desired behaviours. People avoid certain behaviours that invite criticismand punishment. A bank officer would want to do a post graduate course in finance, if itearns him increments and makes him eligible for further promotions. Both the externalrewards (investments, praise) and the internal rewards (a feeling of pride and achievement)associated with desired behaviours compel subjects to learn properly. To be effective,the trainer must reward desired behaviours only. If he rewards poor performance, theresults may be disastrous: good performers may quit in frustration, accidents may go up,productivity may suffer. The reinforcement principle is also based on the premise thatpunishment is less effective in learning than reward. Punishment is a pointer to undesirablebehaviours. When administered, it causes pain to the employee. He may or may not

9 1

Orientation & Trainingrepeat the mistakes. The reactions may be mild or wild. Action taken to repeal a personfrom undesirable action is punishment. If administered properly, punishment may forcethe trainee to modify the undesired or incorrect behaviours.

8.4.4 Feedback

People learn best if reinforcement is given as soon as possible after training. Everyemployee wants to know what is expected of him and how well he is doing. If he is offthe track, somebody must put him back on the rails. The errors in such cases must berectified immediately. The trainee after learning the right behaviour is motivated to dothings in a ‘right’ way and earn the associated rewards. Positive feedback (showing thetrainee the right way of doing things) is to be preferred to negative feedback (telling thetrainee that he is not correct) when we want to change behaviour.

8.4.5 Spaced Practice

Learning takes place easily if the practice sessions are spread over a period of time.New employees learn better if the orientation programme is spread over a two or threeday period, instead of covering it all in one day. For memorising tasks, ‘massed’ practiceis usually more effective. Imagine the way schools ask the kids to say the Lord’s prayeraloud. Can you memorise a long poem by learning only one line per day? You tend toforget the beginning of the poem by the time you reach the last stanza. For ‘acquiring’skills as stated by Mathis and Jackson, spaced practice is usually the best. This incrementalapproach to skill acquisition minimises the physical fatigue that deters learning.

8.4.6 Whole Learning

The concept of whole learning suggests that employees learn better if the job informationis explained as an entire logical process, so that they can see how the various actions fittogether into the ‘big picture’. A broad overview of what the trainee would be doing onthe job should be given top priority, if learning has to take place quickly. Research studieshave also indicated that it is more efficient to practice a whole task all at once ratherthan trying to master the various components of the task at different intervals.

8.4.7 Active Practice

‘Practice makes a man perfect’: so said Bacon. To be a swimmer, you should plungeinto water instead of simply reading about swimming or looking at films of the worlds’best swimmers. Learning is enhanced when trainees are provided ample opportunities torepeat the task. For maximum benefit, practice sessions should be distributed over time.

8.4.8 Need Analysis

Training efforts must aim at meeting the requirements of the organisation (long-term)and the individual employees (short-term). This involves finding answers to questionssuch as: Whether training is needed? If yes, where is it needed? Which training is needed?etc. Once we identify training gaps within the organisation, it becomes easy to design anappropriate training programme. Training needs can be identified through the followingtypes of analysis, as shown in Box 8.2.

1. Organisational analysis: It involves a study of the entire organisation in terms ofits objectives, its resources, the utilisation of these resources, in order to achievestated objectives and its interaction pattern with environment. The importantelements that are closely examined in this connection are:

i. Analysis of objectives: This is a study of short term and long term objectivesand the strategies followed at various levels to meet these objectives.

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Human Resource Management ii. Resource utilisation analysis: How the various organisational resources(human, physical and financial) are put to use is the main focus of this study.The contributions of various departments are also examined by establishingefficiency indices for each unit. This is done to find out comparative labourcosts, whether a unit is under-manned or over-manned.

iii. Environmental scanning: Here the economic, political, socio-cultural andtechnological environment of the organisation is examined.

Box 8.2: Data Sources used in Training Needs Assessment

Source: M.L. Moore and P. Dutton, Training needs analysis: Review and Critique. Academy of ManagementReview, 3, 1978

iv. Organisational climate analysis: The climate of an organisation speaksabout the attitudes of members towards work, company policies, supervisors,etc. Absenteeism, turnover ratios generally reflect the prevailing employeeattitudes. These can be used to find out whether training efforts have improvedthe overall climate within the company or not.

2. Task or role analysis: This is a detailed examination of a job, its components, itsvarious operations and conditions under which it has to be performed. The focushere is on the roles played by an individual and the training needed to perform suchroles. The whole exercise is meant to find out how the various tasks have to beperformed and what kind of skills, knowledge, attitudes are needed to meet the jobneeds. Questionnaires, interviews, reports, tests, observation and other methodsare generally used to collect job related information from time-to-time. After collectingthe information, an appropriate training programme may be designed, paying attentionto (i) performance standards required of employees, (ii) the tasks they have todischarge, (iii) the methods they will employ on the job and (iv) how they havelearned such methods, etc.

3. Person analysis: Here the focus is on the individual in a given job. There are threeissues to be resolved through manpower analysis. First, we try to find out whetherperformance is satisfactory and training is required. Second, whether the employeeis capable of being trained and the specific areas in which training is needed.Finally, we need to state whether poor performers (who can improve with requisitetraining inputs) on the job need to be replaced by those who can do the job. Otheroptions to training such as modifications in the job or processes should also belooked into. Personal observation, performance reviews, supervisory reports,

Organisational Analysis Task Analysis Person Analysis

Organisational goats and objectives

Job descriptions Performance data or appraisals

Personnel inventories Job specifications Work sampling

Skills inventories Performance standards Interviews

Organisational climate analysis Performing the job Questionnaires

Efficiency indexes Work sampling Tests (KASOCs)

Changes in systems or subsystems (e.g., equipment)

Reviewing literature on the job Customer/employee attitude surveys

Management requests Asking questions about the job Training progress

Exit interviews Training committees Rating scales

MBO or work planning systems Analysis of operating problems CIT

Customer survey/satisfaction data

Diaries

Devised situations (e.g., role play)

Assessment centers MBO or work planning systems

9 3

Orientation & Trainingdiagnostic tests help in collecting the required information and select particulartraining options that try to improve the performance of individual workers. (seeBox next page)

To be effective, training efforts must continuously monitor and coordinate the threekinds of analyses described above. An appropriate programme that meets thecompany’s objectives, task and employee needs may then be introduced. Further,the training needs have to be prioritised so that the limited resources that are allocatedto fill training gaps are put to use in a proper way.

Box 8.3: Model Form for Conducting a ‘Training Needs’ Assessment

Conducting a Needs Assessment: A Model Form

Job _________________________________ Title __________________________________

Interviewer(s) _________________________ Date _________________________________

Part I Background Information on Interviewee

Years on the Job ______________________ Years in the company_____________________

Educational/TechnicalQualifications________________________

Part II Organisational Analysis

1. In your view, what are the purposes of training ?

2. Do you think the current training programmes in your firm serve the above purposes?

3. What do you think would be the responses of your colleagues regarding training in your firm?

4. Do you think trainees are motivated to attend training? Explain in detail.

5. Do you think employees in your firm offer any resistance to training? Please advance suggestionsto minimise this resistance.

6. What positive consequences are associated with successful completion of training? (Like increasedpay, recognition, greater promotional opportunities) Are there any negative consequencesassociated with training? (like loss of production, loss of status among co-workers)

7. Do your think it is difficult for trainees to apply the skills they learned in training once theyreturn to the job? Why or why not?

8. For training programmes you have attended, are you asked to provide your reactions to theprogramme? Are you given training tests before and after training to assess a change in yourtraining? If so, describe the types of measures that are used to assess your reactions and learning.

Part III Task and Person Analysis

9. Describe the major duties of your job. Rank them in terms of importance (1= most important)

10. Think about a person who is very effective at your job. What knowledge, skills or abilities doesthis person possess? Can these skills be enhanced through training? If yes, explain the type oftraining that might be helpful.

11. Do you foresee any additional job demands being added to the current responsibilities in yourjob in the next 5 years or so? If yes, what additional skills or abilities will be required to meetthese demands?

8.5 TRAINING TECHNIQUES

Training methods are usually classified by the location of instruction. On the job trainingis provided when the workers are taught relevant knowledge, skills and abilities at theactual workplace; off-the-job training, on the other hand, requires that trainees learn at alocation other than the real workspot. Some of the widely used training methods arelisted below.

8.5.1 Job Instruction Training (JIT)

The JIT method (developed during World War II) is a four-step instructional processinvolving preparation, presentation, performance try out and follow up. It is used primarily

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Human Resource Management to teach workers how to do their current jobs. A trainer, supervisor or co-worker acts asthe coach. The four steps followed in the JIT methods are:

i. The trainee receives an overview of the job, its purpose and its desired outcomes,with a clear focus on the relevance of training.

ii. The trainer demonstrates the job in order to give the employee a model to copy.The trainer shows a right way to handle the job.

iii. Next, the employee is permitted to copy the trainer’s way. Demonstrations by thetrainer and practice by the trainee are repeated until the trainee masters the rightway to handle the job.

iv. Finally, the employee does the job independently without supervision.

Box 8.4: Job Instruction Training

Merits Demerits

l Trainee learns fast through practice l The trainee should be as good as the trainer.and observation. If the trainer is not good, transference of

knowledge and skills will be poor.

l It is economical as it does not require l While learning, trainee may damage equipment,

any special settings. Also, mistakes waste materials, cause accidents frequently.

can be corrected immediately.

l The trainee gains confidence quickly as he l Experienced workers cannot use thedoes the work himself in actual setting with machinery while it is being used for training.help from supervisor.

l It is most suitable for unskilled and semi

-skilled jobs where the job operations are

simple; easy to explain and demonstratewithin a short span of time.

8.5.2 Coaching

Coaching is a kind of daily training and feedback given to employees by immediatesupervisors. It involves a continuous process of learning by doing. It may be defined asan informal, unplanned training and development activity provided by supervisors andpeers. In coaching, the supervisor explains things and answers questions; he throws lighton why things are done the way they are; he offers a model for trainees to copy; conductslot of decision making meetings with trainees; procedures are agreed upon and the traineeis given enough authority to make divisions and even commit mistakes. Of course, coachingcan be a taxing job in that the coach may not possess requisite skills to guide the learnerin a systematic way. Sometimes, doing a full day’s work may be more important thanputting the learner on track.

When to use coaching usefully? Coaching could be put to good use when:

i. an employee demonstrates a new competency

ii. an employee expresses interest in a different job within the organisation

iii. an employee seeks feedback

iv. an employee is expressing low morale, violating company policies or practices orhaving performance problems

v. an employee needs help with a new skill following a formal training programme.

Effective working, obviously, requires patience and communication skills. It involves:

i. explaining appropriate ways of doing things

ii. making clear why actions were taken

iii. stating observations accurately

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Orientation & Trainingiv. offering possible alternatives / suggestions

v. following up

8.5.3 Mentoring

Mentoring is a relationship in which a senior manager in an organisation assumes theresponsibility for grooming a junior person. Technical, interpersonal and political skillsare generally conveyed in such a relationship from the more experienced person. Amentor is a teacher, spouse, counsellor, developer of skills and intellect, host, guide,exemplar, and most importantly, supporter and facilitator in the realisation of the visionthe young person (protégé) has about the kind of life he wants as an adult. The mainobjective of mentoring is to help an employee attain psychological maturity andeffectiveness and get integrated with the organisation. In a work situation, such mentoringcan take place at both formal and informal levels, depending on the prevailing workculture and the commitment from the top management. Formal mentoring can be veryfruitful, if management invests time and money in such relationship building exercises.The important features/processes of mentoring may be presented thus (Figure 8.1):

Figure 8.1: Mentoring Functions

1. Career functions: Career functions are those aspects of the relationship thatenhance career advancement. These include:

i. Sponsorship: Where mentors actively nominate a junior person(called ‘mentee’) for promotions or desirable positions.

ii. Exposure and visibility: Where mentors offer opportunities for mentees tointeract with senior executives, demonstrate their abilities and exploit theirpotential.

iii. Coaching: Mentors help mentees to analyse how they are doing their workand to define or redefine their aspirations. Here mentors offer practical adviceon how to accomplish objectives and gain recognition from others.

iv. Protection: Mentors shield the junior person from harmful situations/seniors.

v. Challenging assignments: Mentors help mentees develop necessarycompetencies through challenging job assignments and appropriate feedback.Mentors create opportunities for their clients to prove their worth – todemonstrate clearly what they have to offer.

2. Psychological functions: Psychological functions are those aspects that enhancethe mentee’s sense of competence, and identify effectiveness in a professionalrole. These include:

i. Role modelling: Mentors offer mentees a pattern of values and behavioursto imitate

Successfu l M entoring

Good mentors......

l Listen and understand

l Challenge and stimulatelearning

l Coach

l Build self-confidence

l Provide wise counsell Teach by example

l Act as role model

l Share experiencesl Offer encouragement

Good mentees......

l Listen

l Act on Advicel Show commitment to

learn

l Check ego at the door

l Ask for feedbackl Are open minded

l Are willing to change

l Are proactive

SuccessfulMentoring

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Human Resource Management ii. Acceptance and confirmation: mentors offer support, guidance andencouragement to mentees so that they can solve the problems independentlyand gain confidence in course of time. Mentors also help people to learnabout the organisation’s culture and understand why things are done in certainways.

iii. Counselling: Mentors help mentees work out their personal problems, learnabout what to do and what not to do, offer advice on what works and whatdoesn’t, and do everything to demonstrate improved performance and preparethemselves for greater responsibility.

iv. Friendship: Mentors offer practical help and support to mentees so thatthey can indulge in mutually satisfying social interactions (with peers,subordinates, bosses and customers)

Box 8.5: Merits and Demerits of Mentoring

Merits Demerits

l There is an excellent opportunity to learn l It may create feelings of jealousy among quicklythrough continuous interaction. other workers whoare not able to show equally good performance.

l Constant guidance helps the mentee l If mentors form overly strong bonds withto be on track, using facilities to good trainees, unwarranted favouritism may result.advantage. This can have a demoralising effect on other

workers, affecting their work performance in anegative way.

Mentoring in India is based on the time-honoured guru-shishya relationship where theguru would do everything to develop the personality of the shishya, offering emotionalsupport, and guidance. Companies like TISCO, Neyveli Lignite Corporation, Polaris,Coca-Cola India have used mentoring systems to good effect in recent times (EconomicTimes, 25 Oct., 2002). Organisations like General Electric, Intel, Proctor & Gamble havegiven a lot of importance to mentoring programmes, going even gone to the extent ofpenalising senior managers if they fail to develop leadership skills among subordinates.Of course, mentoring is not without its problems. Mentors who are dissatisfied with theirjobs and those who teach or narrow or distorted view of events may not help a protégé’sdevelopment. Not all mentors are well prepared to transfer their skills and wisdom totheir junior colleagues. When young people are bombarded with conflicting viewpoints –about how things should go – from a series of advisors, they may find it difficult to getahead with confidence. Mentoring can succeed if (i) there is genuine support andcommitment from top management (ii) mentors take up their job seriously and transferideas, skills and experiences in a systematic way and (iii) mentees believe in the wholeprocess and carry out things in an appropriate manner.

8.5.4 Job Rotation

This kind of training involves the movement of trainee from one job to another. Thishelps him to have a general understanding of how the organisation functions. The purposeof job rotation is to provide trainees with a larger organisational perspective and a greaterunderstanding of different functional areas as well as a better sense of their own careerobjectives and interests. Apart from relieving boredom, job rotation allows trainees tobuild rapport with a wide range of individuals within the organisation, facilitating futurecooperation among departments. The cross-trained personnel offer a great amount offlexibility for organisations when transfers, promotions or replacements become inevitable.

Job rotation may pose several problems, especially when the trainees are rolled on variousjobs at frequent intervals. In such a case, trainees do not usually stay long enough in anysingle phase of the operation to develop a high degree of expertise. For slow learners,

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Orientation & Trainingthere is little room to integrate resources properly. Trainees can become confused whenthey are exposed to rotating managers, with contrasting styles of operation. Today’smanager’s commands may be replaced by another set from another manager! Further,job rotation can be quite expensive. A substantial amount of managerial time is lost whentrainees change positions, because they must be acquainted with different people andtechniques in each department. Development costs can go up and productivity is reducedby moving a trainee into a new position when his efficiency levels begin to improve at theprior job. Inexperienced trainees may fail to handle new tasks in an efficient way. Intelligentand aggressive trainees, on the offer hand, may find the system to be thoroughly boringas they continue to perform more or less similar jobs without any stretch, pull and challenge.To get the best results out of the system, it should be tailored to the needs, interests andcapabilities of the individual trainee, and not be a standard sequence that all traineesundergo. Box 8.6 presents the merits and demerits of job rotation:

Box 8.6: Job Rotation: Merits and Demerits

8.5.5 Apprenticeship Training

Most craft workers such as plumbers and carpenters are trained through formalapprenticeship programmes. Apprentices are trainees who spend a prescribed amountof time working with an experienced guide, coach or trainer. Assistantships and internshipsare similar to apprenticeships because they also demand high levels of participation fromthe trainee. An internship is a kind of on-the-job training that usually combines job trainingwith classroom instruction in trade schools, colleges or universities. Coaching, as explainedabove, is similar to apprenticeship because the coach attempts to provide a model for thetrainee to copy. One important disadvantage of the apprenticeship methods is the uniformperiod of training offered to trainees. People have different abilities and learn at variedrates. Those who learn fast may quit the programme in frustration. Slow learners mayneed additional training time. It is also likely that in these days of rapid changes intechnology, old skills may get outdated quickly. Trainees who spend years learning specificskills may find, upon completion of their programmes, that the job skills they acquired areno longer appropriate.

8.5.6 Committee Assignments

In this method, trainees are asked to solve an actual organisational problem. The traineeshave to work together and offer solution to the problem. Assigning talented employeesto important committees can give these employees a broadening experience and canhelp them to understand the personalities, issues and processes governing the organisation.It helps them to develop team spirit and work unitedly toward common goals. However,managers should very well understand that committee assignments could become notorioustime wasting activities.

The above on-the-job methods are cost effective. Workers actually produce while theylearn. Since immediate feedback is available, they motivate trainees to observe andlearn the right way of doing things. Very few problems arise in the case of transfer oftraining because the employees learn in the actual work environment where the skillsthat are learnt are actually used. On-the-job methods may cause disruptions in productionschedules. Experienced workers cannot use the facilities that are used in training. Poor

Merits Demerits

l Improves participant’s job skills, job satisfaction l Increased workload for participants

l Provides valuable opportunities to network within the organisation

l Constant job change may produce stress and anxiety

l Offers faster promotions and higher salaries to quick learners

l Mere multiplication of duties do not enrich the life of a trainee

l Lateral transfers may be beneficial in rekindling enthusiasm and developing new talents

l Development costs may shoot up when trainees commit mistakes, handle tasks less optimally

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Human Resource Management learners may damage machinery and equipment. Finally, if the trainer does not possessteaching skills, there is very little benefit to the trainee.

8.6 SPECIAL PURPOSE TRAINING

Under this method of training, the trainee is separated from the job situation and hisattention is focused upon learning the material related to his future job performance.Since the trainee is not distracted by job requirements, he can focus his entire concentrationon learning the job rather than spending his time in performing it. There is an opportunityfor freedom of expression for the trainees. Off-the-job training methods are as follows:

i. Vestibule training: In this method, actual work conditions are simulated in a classroom. Material, files and equipment – those that are used in actual job performanceare also used in the training. This type of training is commonly used for trainingpersonnel for clerical and semi-skilled jobs. The duration of this training rangesfrom a few days to a few weeks. Theory can be related to practice in this method.

ii. Role playing: It is defined as a method of human interaction that involves realisticbehaviour in imaginary situations. This method of training involves action, doingand practice. The participants play the role of certain characters, such as theproduction manager, mechanical engineer, superintendents, maintenance engineers,quality control inspectors, foreman, workers and the like. This method is mostlyused for developing interpersonal interactions and relations.

iii. Lecture method: The lecture is a traditional and direct method of instruction. Theinstructor organises the material and gives it to a group of trainees in the form of atalk. To be effective, the lecture must motivate and create interest among thetrainees. An advantage of lecture method is that it is direct and can be used for alarge group of trainees. Thus, costs and time involved are reduced. The majorlimitation of the lecture method is that it does not provide for transfer of trainingeffectively.

iv. Conference/discussion approach: In this method, the trainer delivers a lectureand involves the trainee in a discussion so that his doubts about the job get clarified.When big organisations use this method, the trainer uses audio-visual aids such asblackboards, mockups and slides; in some cases the lectures are videotaped oraudio taped. Even the trainee’s presentation can be taped for self-confrontationand self-assessment. The conference is, thus, a group-centred approach wherethere is a clarification of ideas, communication of procedures and standards to thetrainees. Those individuals who have a general educational background and whateverspecific skills are required – such as typing, shorthand, office equipment operation,filing, indexing, recording, etc. – may be provided with specific instructions to handletheir respective jobs.

v. Programmed instruction: This method has become popular in recent years. Thesubject-matter to be learned is presented in a series of carefully planned sequentialunits. These units are arranged from simple to more complex levels of instruction.The trainee goes through these units by answering questions or filling the blanks.This method is, thus, expensive and time-consuming.

8.6.1 Training via Internet

Training programmes delivered via intranet have now been thought of most cost effectiveroute. It is not only cost effective but also caters to the real time information need ofemployees. However, it involves convergence of several technologies, like; hardware,software, web-designing and authoring, instructional design, multi-media design,telecommunications and finally internet intranet network management. Organisationscan outsource e-learning training modules at relatively cheaper rate. Even though training

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Orientation & Trainingthrough e-learning is globally increasing, we do not have adequate empirical evidence tojustify this.

Check Your Progress

1. Give one line definition for following:

(a) Orientation

(b) Motivation

(c) Reinforcement

(d) JIT

(e) Apprentice Training

2. Write True and False against each statement.

(a) The advantage of lecture method is that it direct & can be used for a large no.of groups/trainees. ( )

(b) The limitation of lecture method is that it does not provide for transfer oftraining effectively. ( )

(c) Role playing means act of doing something dramatically. ( )

(d) Job Rotation means movement of trainee from one job to another. ( )

8.7 LET US SUM UP

Orientation or induction is the task of introducing the new employees to the organisationand its policies, procedures and rules. A typical formal orientation programme may lasta day or less in most organisations.

Induction serves various purposes like:

Removes fears, Creates a good impression and Acts as a valuable source of information.

Acts as valuable source of information.

Training is essential for job success. It can lead to higher production, fewer mistakes,greater job satisfaction and lower turnover. These benefits accrue to both the traineeand the organisation, if managers understand the principles behind the training process.To this end, training efforts must invariably follow certain learning-oriented guidelines.

Training methods are usually classified by the location of instruction.

Some of the widely used training methods are:

Job Instruction Training (JIT), Coaching, Mentoring etc.

Training programmes delivered via internet have now been thought of next cost effectiveroute. It is not only cost effective but also caters to the real time information need ofemployees.

8.8 LESSON-END ACTIVITIES

(i) Assume you were asked to develop a training programme to improve customersales skills. What training techniques would your use? Why?

(ii) Specify the training methods you recommend for each of the following occupations.Why?

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Human Resource Management (a) A plumber

(b) An unskilled-assembly line worker

(c) An office clerk

(d) An unexperienced manager

8.9 KEYWORDS

Induction

Modelling

Motivation

Reinforcement

Feedback

Spaced Practice

JIT

Mentoring


1. What are true objectives of training?

2. Distinguish between training and development.

3. Explain various method of trap.

4. Distinguish between induction and training.

5. Brief outline the steps involved in conducting a training programme in a systematicway.








LESSON

9DEVELOPING MANAGERS

CONTENTS


9.1 Introduction

9.2 Management Development

9.2.1 Definition

9.2.2 Importance

9.3 Steps in the Organisation of a Management Development Programme

9.4 The Responsive Managers-On the Job and Off the Job Development Techniques andskills

9.4.1 Decision-making Skills

9.4.2 Interpersonal Skills

9.4.3 Job Knowledge

9.4.4 Organisational Knowledge

9.4.5 General Knowledge

9.4.6 Specific Individual Needs

9.4.7 Other Off-the-Job Methods

9.5 CD-Roms

9.6 Key Factor for Success

9.7 Let us Sum Up


9.9 Keywords




In this lesson we shall discuss about developing managers. After going through thislesson you will be able to:

(i) Understand management development programme and on-off the job developmenttechniques and skills.

(ii) Analyse CD ROMs and key factors for success.

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Management development is the process in which managers/executives acquire notonly skills and competencies in their present jobs but also capabilities for future managerialtasks of increasing difficulties and scope. To be useful and productive, managers need todevelop their capabilities at frequent intervals.

9.2 MANAGEMENT DEVELOPMENT

Managers are the indispensable resources, the priceless assets of an organisation. Theygenerate creative ideas, translate them into concrete action plans and produce results.When they succeed, they are able to keep everyone in good humour – includingshareholders, employees and the general public. They are hailed as ‘invincible corporateheroes’ and even treated as prized possessions of a country. When they fail, they destroythe scarce corporate resources and make everyone cry. The outcomes of managerialactions, thus, are going to be deep, profound and decisive. To get ahead in the raceespecially in a complex, dynamic and ever-changing world, managers need to developtheir capabilities that go beyond those required by the current job.

9.2.1 Definition

Executive or management development is a planned, systematic and continuous processof learning and growth by which managers develop their conceptual and analytical abilitiesto manage. It is the result of not only participation in formal courses of instruction butalso of actual job experience. It is primarily concerned with improving the performanceof managers by giving them stimulating opportunities for growth and development.

Box 9.1: Features of Executive Development

l It is a planned effort to improve executives’ ability to handle a variety of assignments

l It is not a one-shot deal, but a continuous, ongoing activity

l It aims at improving the total personality of an executive

l It aims at meeting future needs unlike training, which seeks to meet current needs

l It is a long term process, as managers take time to acquire and improve their capabilities

l It is proactive in nature as it focuses attention on the present as well as future requirementsof both the organisation and the individual

9.2.2 Importance

Executive Development has become indispensable to modern organisations in view ofthe following reasons:

i. For any business, Executive Development is an invaluable investment in the longrun. It helps managers to acquire knowledge, skills and abilities (KSAs) required tograpple with complex changes in environment, technology and processes quitesuccessfully. They can have a better grip over market forces and get ahead ofothers in the race in a confident manner.

ii. Developmental efforts help executives to realise their own career goals andaspirations in a planned way.

iii. Executives can show superior performance on the job. By handling varied jobs ofincreasing difficulty and scope, they become more useful, versatile and productive.The rich experience that they gain over a period of time would help them step intothe shoes of their superiors easily.

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Developing Managersiv. Executive Development programmes help managers to broader their outlook, lookinto various problems dispassionately, examine the consequences carefully,appreciate how others would react to a particular solution and discharge theirresponsibilities taking a holistic view of the entire organisation.

v. The special courses, projects, committee assignments, job rotation and otherexercises help managers to have a feel of how to discharge their duties withoutrubbing people (subordinates, peers, superiors, competitors, customers, etc.) thewrong way.

9.3 STEPS IN THE ORGANISATION OF A MANAGEMENTDEVELOPMENT PROGRAMME

The following are the important steps in the organisation of a management developmentprogramme:

i. Analysis of organisational development needs: After deciding to launch amanagement development programme, a close and critical examination of the presentand future development needs of the organisation has to be made. We should knowhow many and what type of managers are required to meet the present and futurerequirements.

A comparison of the already existing talents with those that are required to meetthe projected needs will help the top management to take a policy decision as towhether it wishes to fill those positions from within the organisation or from outsidesources.

ii. Appraisal of present management talents: In order to make the above suggestedcomparison, a qualitative assessment of the existing executive talents should bemade and an estimate of their potential for development should be added to that.Only then can it be compared with the projected required talents.

iii. Inventory of management manpower: This is prepared to have a complete setof information about each executive in each position. For each member of theexecutive team, a card is prepared listing such data as name, age, length of service,education, work experience, health record, psychological test results andperformance appraisal data, etc. The selection of individuals for a managementdevelopment programme is made on the basis of the kind of background theypossess.

Such information, when analysed, discloses the strengths as well as weaknesses ordeficiencies of managers in certain functions relating to the future needs of theorganisations.

iv. Planning of individual development programmes: Guided by the results of theperformance appraisal that indicates the strengths and weaknesses of each of theexecutives, this activity of planning of individual development programme can beperformed.

v. Establishment of development programmes: It is the duty of the HR departmentto establish the developmental opportunities. The HR department has to identifythe existing level of skills, knowledge, etc., of various executives and comparethem with their respective job requirements. Thus, it identifies developmental needsand requirements and establishes specific development programmes, like leadershipcourses, management games, sensitivity training, etc.

vi. Evaluation of results: Executive development programmes consume a lot of time,money and effort. It is, therefore, essential to find out whether the programmeshave been on track or not. Programme evaluation will cover the areas where

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Human Resource Management changes need to be undertaken so that the participants would find the same to berelevant and useful for enriching their knowledge and experience in future. Opinionsurveys, tests, interviews, observation of trainee reactions, rating of the variouscomponents of training, etc., could be used to evaluate executive developmentprogrammes.

9.4 THE RESPONSIVE MANAGERS-ON THE JOB ANDOFF THE JOB DEVELOPMENT TECHNIQUES ANDSKILLS

Management development programmes help in acquiring and developing different typesof managerial skills and knowledge. Different types of techniques are used to acquireand develop various types of managerial skills and knowledge. They are(See Box 9.2):

Box 9.2: Methods of Developing Managers

1. Decision-making skills (a) In-basket

(b) Business game

(c) Case study

2. Interpersonal skills (a) Role play

(b) Sensitivity training

(c) Behaviour Modelling

3. Job knowledge (a) On-the-job experiences

(b) Coaching

(c) Understudy

4. Organisational knowledge (a) Job rotation

(b) Multiple management

5. General knowledge (a) Special courses

(b) Special meetings

(c) Specific readings

6. Specific individual needs (a) Special projects

(b) Committee assignments

9.4.1 Decision-making Skills

The main job of a manager is to make both strategic and routine decisions. His ability totake effective decisions can be enhanced by developing decision-making skills throughvarious techniques, as explained below:

i. In-basket: In this method, the participant is given a number of business paperssuch as memoranda, reports and telephone messages that would typically cross amanager’s desk. The papers, presented in no particular sequence, call for actionsranging from urgent to routine handling. The participant is required to act on theinformation contained in these papers. Assigning a priority to each particular matteris initially required.

If the trainee is asked to decide issues within a time-frame, it creates a healthycompetition among participants. The method is simple and easy to follow. Traineeslearn quickly as they have to list priorities, make assumptions, assign work to othersand get things done within a time-frame. Since participants hail from various sections,it is easy to put out inter-departmental fires. On the negative side, the method is

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Developing Managerssomewhat academic and removed from real life situations. The participants, knowingfull well that they are handling an imaginary situation, may not be too excited aboutthe whole exercise and may not fully commit themselves to the task.

ii. Case study: This is a training method that employs simulated business problemsfor trainees to solve. The individual is expected to study the information given inthe case and make decisions based on the situation. If the student is provided acase involving an actual company, he is expected to research the firm to gain abetter appreciation of its financial condition and corporate culture. Typically, thecase method is used in the class room with an instructor who serves as a facilitator.Experienced trainers readily point out that the case study is most appropriate where:

l analytic, problem-solving and thinking skills are most important.

l the KSAs are complex and participants need time to master them.

l active participation is required.

l the process of learning (questioning, interpreting etc.) is as important as thecontent.

l team problem solving and interaction are possible.

Box 9.3: Merits and Demerits of the Case Study Method

The success of this method is closely linked to the maturity and experience of the trainerwho should facilitate the group’s learning, keep participants on track and help them seethe underlying management concepts in the case clearly. Further, it is also necessary tocome up with good case material based on real life situations and present the samebefore trainees in an interesting manner. When cases are meaningful and are similar towork related situations, trainees can certainly improve their decision-making skills andproblem-solving abilities.

Box 9.4: When Using Case Studies

l Be clear about learning objectives and explore possible ways to realise the objectives.

l Decide which objectives would be best served by the case method.

l Find out the available cases that might work or consider developing your own.

Merits

l Improves problem-solving skills ofparticipants.

l Trainees can apply theory to practicalproblems and learn quickly. It is a way oflearning by doing.

l Trainees learn how others solve a situationin their own unique way. They get a feel ofhow others work at a problem and beginto appreciate each other’s thinking.

l Case studies can provide interestingdebates among trainees, as well asexcellent opportunities for individuals todefend their analytical and judgementalabilities.

l If the case reflects a real life situation,participants take keen interest and examinethe cross-currents with an open andinquisitive mind.

Demerits

l Good case studies do not originate easily.They are costly and time-consuming (collectdata, analyse, report, summarise)exercises.

l Examining historical evidence may fail todevelop the analytical and reasoning abilitiesof participants.

l Cases, sometimes, are not sufficientlyrealistic to be useful.

l Cases may contain informationinappropriate to the kinds of decisions thattrainees would make in a real setting.

l Indiscriminate use of case studies may nothelp participants who are not mature enoughto analyse and participate in discussionsactively.

l A trainee who is not skilled in this techniquecan undermine its usefulness.

l The case study method have little or nothingin common with the trainee's workplace,which may limit its effectiveness.

Contd....

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Human Resource Management l Set up the activity – including the case material, the room and the schedule

l Observe the principles that guide effective group interactions

l Provide an opportunity to all trainees to participate meaningfully and try to keep the groupssmall.

l Stop for process checks and get set to intervene when interactions go out of hand

l Allow for different learning styles

l Clarify the trainer's role as a facilitator

l Bridge the gap between theory and practice

Source: Einseidel A.A., Case studies: Indispensable Tools for Trainers, Training and Development,August 1995.

iii. Business games: Simulations that represent actual business situations are knownas business games. These simulations attempt to duplicate selected factors in aspecific situation, which are then manipulated by the participants. Business gamesinvolve two or more hypothetical organisations competing in a given product market.The participants are assigned such roles as Managing Director, General Manager,Marketing Manager, etc. They make decisions affecting price levels, productionvolume and inventory levels. The results of their decisions are manipulated by acomputer programme, with the results simulating those of an actual business situation.Participants are able to see how their decisions affect the other groups and viceversa.

Box 9.5: Merits and Demerits of the Business Game Method

9.4.2 Interpersonal Skills

A manager can achieve results only when he is able to put individuals on the right track.He must interact with people actively and make them work unitedly. Managerial skills inthe area of interpersonal relations can be enhanced through various techniques, viz.,Role Play and Sensitivity Training.

1. Role play: This is a technique in which some problem – real or imaginary – involvinghuman interaction is presented and then spontaneously acted out. Participants mayassume the roles of specific organisational members in a given situation and thenact out their roles. For example, a trainee might be asked to play the role of asupervisor who is required to discipline an employee smoking in the plant in violationof the rules. Another participant would assume the role of the employee. Theindividual playing the supervisory role would then proceed to take whatever actionhe deems appropriate. This action then provides the basis for discussion andcomments by the groups.

Merits

l Business games compress time; events that takepainfully long time are made to occur in a matterof hours.

l One can learn from mistakes, take a differentcourse of action by looking at the consequencesand improve performance.

l They promote increased understandingof complex relationships among organisationalunits.

l “They help trainees develop their problem solvingskills as well as to focus attention on planningrather than just putting out fires.”

l Prompt feedback facilitates quick learning.

Demerits

l Difficult and expensive to develop anduse good business games.

l They are often far removed from reality.In real life, an executive may get unlimitedchances to find his way through thejungle, depending on his mental make-up(instead of choosing from an imaginativelist of alternatives).

l Participants may become so engrossedin pushing others to the wall that they failto grasp the underlying managementprinciples being taught.

l Creativity may take a back seat whenunorthodox strategies advanced byinnovative participants may not findacceptance from others in the race.

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Developing ManagersRoleplay develops interpersonal skills among participants. They learn by doing things.Immediate feedback helps them correct mistakes, change, switch gears hats andreorient their focus in a right way. The competitive atmosphere spurs them toparticipate actively, listen to what others say, observe and analyse behaviouralresponses and improve their own performance by putting their textual learning totest.

On the negative side, realism is sometimes lacking in role-playing, so the learningexperience is diminished. It is not easy to duplicate the pressures and realities ofactual decision-making on the job; and individuals, often act very differently in real-life situations than they do in acting out a simulated exercise. Many trainees areoften uncomfortable in role-playing situations, and trainers must introduce thesituations well so that learning can take place. To this end, trainers should:

l ensure that members of the group are comfortable with each other

l select and prepare the role players by introducing a specific situation

l help participants prepare; ask them to prepare potential characters

l realise that volunteers make better role players

l prepare observers by giving them specific tasks (e.g, evaluation, feedback)

l guide the role play enactment over its bumps (since it is not scripted)

l keep it short

l discuss the enactment and prepare bulleted points of what was learned

2. Sensitivity training: This is a method of changing behaviour through unstructuredgroup interaction. Sensitivity training is sought to help individuals toward betterrelations with others. The primary focus is on reducing interpersonal friction.

In sensitivity training, the actual technique employed is T-group (T stands fortraining). It is a small group of ten to twelve people assisted by a professionalbehavioural scientist who acts as a catalyst and trainer for the group. There is nospecified agenda. He merely creates the opportunity for group members to expresstheir ideas and feelings freely. Since the trainer has no leadership role to play, thegroup must work out its own methods of proceeding. A leaderless and agendum-free group session is on. They can discuss anything they like. Individuals are allowedto focus on behaviour rather than on duties. As members engage in the dialogue,they are encouraged to learn about themselves as they interact with others.

Box 9.6: Features of T-Group Training

l T-Group consists of 10-12 persons.

l A leader acts as a catalyst and provides a free and open environment for discussion

l There is no specified agenda

l Members express their ideas, feelings and thoughts freely and openly

l The focus is on behaviour rather than on duties

l The aim is to achieve behaviour effectiveness in transactions with one's environment

3. Benefit and Costs: The benefits and costs of sensitivity training have beensummarised through Box 9.7.

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Human Resource Management Box 9.7: Sensitivity – A Balance Sheet

9.4.3 Job Knowledge

In addition to decision-making skills and inter-personal skills, managers should also possessjob knowledge to perform their jobs effectively. Trainers acquire job knowledge throughon-the-job experience, coaching and understudy.

1. On-the-job experience: On-the-job techniques are most widely used. No othertechnique may interest the trainee so much as the location of the learner is not anartificial one in the classroom techniques. The success of these techniques dependson the immediate supervisor and his teaching abilities. On-the-job techniques areespecially useful for certain groups like scientific and technical personnel.

Though the costs of training initially appear to be low, they may turn out to be highwhen wastages of all kinds are considered under this type of training.

2. Behaviour modelling: This is an approach that demonstrates desired behaviour,gives trainees the chance to practice and role-play those behaviours and receivefeedback. The basic behaviour modelling involves the following steps :

i. Learning points: At the beginning, the essential goals and objectives of theprogramme are stated. In some cases the learning points are a sequence ofbehaviours that are to be taught.

ii. Modelling: Trainees watch films or videotapes in which a model manageris portrayed dealing with an employee in an effort to improve his performance.The model shows specifically how to deal with the situation and demonstratesthe learning points.

iii. Role playing: Trainees participate in extensive rehearsal of the behavioursshown by the models.

Liabilities

1. The programme of sensitivity training isconsidered to be a waste of time. Evenparticipants who are themselves favourablyimpressed cannot point out the specific benefitsand neither can their associates.

2. T-Group leaders are considered to be amateurheadshrinkers; they are like children playingwith fire.

3. The T-Group experience is an immoral andunjustified invasion of privacy, based on falseassumptions about the nature of humanrelationship at work.

4. The process of sensitivity training involves anemotional blood bath; emotional buffetingcreates a frightening threat to an individual whois a trainee; it can shatter personal defences anddamage future capabilities. Sessions ofsensitivity training may – as happens quiteoften – result in suicide of the interests in theorganisation. It may take months, if not years,to repair the damage caused by sensitivitytraining.

5. Sensitivity training has a tendency to result inundesirable behaviour of employees; for thetrainee (who is immature) will find it easier tofeel hostile without feeling guilty during training.The team work also gets adversely affectedbecause of T-Group training.

Assets

1. A majority of the trainees feel that the experiencegained during training is uniquely valuable, as itdevelops the personality.

2. Practically speaking, there is no real hazard forthe emotionally healthy participants; and sickparticipants are not admitted to the training.

3. Even hardheaded business managers have asofthearted appeal for sensitivity trainingbecause they acknowledge the positive valueof the training. Many organisations have startedpaying impressive amounts for training.

4. Research on sensitivity training also stronglyattests to the benefits of training to employeesin an organisation.

5. Research on sensitivity training also reveals thatparticipants have developed added realism andhonesty in their relationships. Before-and-aftertests indicate significant changes in attitudesand behaviour and in personal growth.

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Developing Managersiv. Social reinforcement: The trainer offers reinforcement in the form of praiseand constructive feedback based on how the trainee performs in the role-playing situation.

v. Transfer of learning: Finally, trainees are encouraged to apply their newskills when they return to their jobs.

Behaviour modelling can be effective. Several controlled studies have demonstratedsuccess in helping managers interact with employees, handle discipline, introducechange and increase productivity.8 This method of learning in isolation may proveto be inadequate, but in combination with other off-the-job techniques may prove tobe useful.

3. Coaching: In coaching, the trainee is placed under a particular supervisor whoacts as an instructor and teaches job knowledge and skills to the trainee. He tellshim what he wants him to do, how it can be done and follows up while it is beingdone and corrects errors. The act of coaching can be done in several ways. Theexecutive, apart from asking trainees to do the routine work, may ask them totackle some complex problems by giving them a chance to participate in decision-making. For effective coaching, a healthy and open relationship must exist betweenemployees and their supervisors. Many firms conduct formal training courses toimprove the coaching skills of their managers.

In coaching, participants can learn by actually doing a piece of work and obtainfeedback on performance quickly.9 However, there is no guarantee that supervisorswill be able to coach in an effective way. It is easy for the 'coach' to fall short inguiding the learner systematically, even if he knows which systematic experiencesare best. Sometimes doing the job on hand may score over learning and watching.Many skills that have an intellectual component are best learned from a book orlecture before coaching could take place. Further, in many cases, the learner cannotdevelop much beyond the limits of his own boss's abilities. Coaching would workwell if the coach provides a good model with whom the trainee can identify, if bothcan be open with each other, if the coach accepts his responsibility fully, and if heprovides the trainee with recognition of his improvement and appropriate rewards.

4. Understudy: An understudy is a person who is in training to assume at a futuretime, the full responsibility of the position currently held by his superior. This methodsupplies the organisation a person with as much competence as the superior to fillhis post which may fall vacant because of promotion, retirement or transfer.An understudy is usually chosen by the head of a particular department. The headwill then teach him what all his job involves. The superior involves him in decision-making by discussing the daily operating problems as well.

Understudy assignments help the superior to lighten his workload by delegatingsome portion of his work to a designated person. The understudy, in turn, gets anopportunity to learn the superior's job and get ready for challenging roles at a laterdate. It is beneficial from the organisation’s point of view also as it will not be at thereceiving end when an executive suddenly leaves his job. On the negative side, thedesignation of a person as an understudy may spark off jealousy and rivalry amongcompeting subordinates. Since the understudy has been specially picked up, otherswho are left out in the race may get a feeling that competition for promotions isover. This would affect the motivation level of both the one who is designated(who tends to breathe easy, take the assignment for granted and even relax for awhile) and the other personnel (who tend to carry the bitter feelings for a long, longtime). The whole exercise would be beneficial only when trainees get a realopportunity to deal with challenging or interesting assignments (instead of performingpaper shuffling chores).

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Human Resource Management 9.4.4 Organisational Knowledge

In addition to job knowledge, managers should also possess knowledge of various jobs,products, markets, finances creditors of the organisation, etc. The techniques of impartingorganisational knowledge are job rotation and multiple management.

a. Job rotation: The transferring of executives from job to job and from departmentto department in a systematic manner is called job rotation. The idea behind this isto give them the required diversified skills and a broader outlook, which are veryimportant at upper management levels. The management should provide a varietyof job experiences for those judged to have the potential for higher ranks beforethey are promoted. Job rotation increases the inter-departmental cooperation andreduces the monotony of the work.

b. Multiple management: Multiple management is a system in which permanentadvisory committees of managers study problems of the company and makerecommendations to higher management. It is also called a Junior-board ofexecutives. These committees discuss the actual problems and different alternativesolutions after which the decisions are taken. Multiple management technique offersseveral advantages: it helps board members to gain first hand experience in variousimportant aspects of business; it becomes easy to spot people with talent; juniorsget a chance to improve their problem solving skills; and more importantly it is aninexpensive way of training a good number of executives to do things on their ownand develop fast.

9.4.5 General Knowledge

In addition to job knowledge and organisational knowledge, managers should possessgeneral knowledge, as the external environment interacts with and influences the business.The general knowledge includes the knowledge about the economic conditions of thecountry and the world in general, in respect of major areas such as prices, GNP percapita income, various other industries, other sectors of the economy, political conditions,social factors, etc. General knowledge can be acquired through special courses, specialmeetings and specific readings.

i. Special courses: Special courses – like the workshops or executive developmentprogrammes organised by the institutes, universities and colleges – help the traineesto acquire general knowledge.

ii. Special meetings: Special meetings organised in Consumers’ Forums, VoluntaryOrganisations, etc., help the trainees develop their general knowledge.

iii. Specific readings: Specific articles published by various journals, specific portionsof important books are provided to the trainees to improve their general knowledge.

9.4.6 Specific Individual Needs

Some trainees may be weak in some areas. Such trainees are provided with specialfacilities for development. These facilities include special projects and committeeassignments.

i. Special projects: In this method, a trainee is put on a project closely related to theobjectives of his department. For example, a new recruit in a property evaluationfirm may be asked to do a small project reviewing the prospects of selling commercialspace in satellite townships (like Gurgaon, Rohtak and Ghaziabad) near Delhi. Theproject will give a first hand experience of the problems and prospects in spaceselling to the new recruit.

ii. Committee assignment: In this method, an ad hoc committee is appointed todiscuss, evaluate and offer suggestions relating to an important aspect of business.

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Developing ManagersFor example, a group of experts may be asked to look into the feasibility of developinga Software Technology Park in an upcoming area by the Delhi DevelopmentAuthority.

9.4.7 Other Off-the-Job Methods

1. Conferences: The conference method is another commonly used method ofexecutive development. Topics such as human relations, safety education, customerrelations, sales training, are often discussed, debated, spoken about at conferencesspecially organised and designed for the purpose. A conference is a meeting ofpeople to discuss a subject of common interest. The conference is structured arounda small group meeting wherein a leader helps the group identify and define a problem,guides the discussion along desired lines and summarises the views that representthe consensus of the group in dealing with the problem. The participants exchangenotes, opinions, ideas on the subject in a systematic, planned way. A conferencemay be divided into small groups for focused discussions. Participants are expectedto air their opinions and thoughts freely. In order to ensure its success, (i) participantsare expected to come prepared for the conference, (ii) the conference leader shouldconduct the sessions according to a plan, giving enough room for healthy interchangeof different viewpoints, (iii) the discussion should proceed along desired lines and(iv) the size of the group should not be too large.

2. Lectures: Lectures are formal presentations on a topic by an experienced andknowledgeable person. The presentation is generally supported by discussions, casestudies, audio-visual aids and film shows. It is a simple and inexpensive way ofimparting knowledge on a topic of special importance to a large audience. Therecould be a speedy interchange of ideas on a specific topic. The method may oftendegenerate into a kind of one-way traffic where the presenter tries to get aheadwithout paying attention to the reactions of the audience. If the lecture is notinteresting enough, the audience may not participate and offer any feedback. Thelisteners play a largely non-participatory role. They may ask questions but theynever get the feel of what is being talked about. Moreover, participants do notshare each other’s experiences and hence the learning is confined to what thepresenter has to say.

The method could be used effectively if the following things are kept in mind:

i. The presentation should be interesting, lively and leave enough room for healthydiscussions mid-way.

ii. The presenter must possess excellent communication and interpersonal skills.Adequate preparation must precede the actual presentation.

iii. To enrich the presentation, audio-visual aids, examples, cases, and real-lifeincidents should be used freely, encouraging the audience to participate freely.Better to set time limits to the lecture, since listeners tend to switch offcompletely beyond a point (say, one or two hours).

3. Group discussion: In this method, papers are presented by two or three traineeson a selected topic, followed by a stimulating discussions. The topics for discussionare selected in advance and the papers concerning the same, written by variousparticipants, are printed and circulated beforehand. It is a variant of the lecturemethod and is generally preferred where the intention is to give wide circulationand participation to a number of experts sharing their experiences with a fairlylarge group of individuals.

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Human Resource Management 4. Programmed instruction (PI): It is based on certain behavioural laws, particularlydealing with reinforcement. Reinforcement means rewarding a correct responseand punishing a wrong one. A major feature of PI is that it offers immediate feedbackon whether the trainee has answered questions correctly or not.

PI is a learner-oriented technique which presents subject matter to the trainees insmall, sequential steps, requiring frequent responses from the trainee and immediatelyoffering him of their accuracy or otherwise. If the response is accurate, he takesup the next level; if not, he is asked to go back and start again. The instructions arecarefully planned moving from the simple to complex ones in a smooth way.

A major plus point of the method is that it allows the trainee to learn in small stepsat a pace and rate suitable to him. He takes active part throughout the programme.Printed instructions could be offered by experts, keeping individual differences inmind. Regular feedback helps the trainer to improve material continuously. Acomputer-aided format can be placed in the hands of trainers with an instructionmanual for getting excellent results. On the negative side, the impersonal atmospheremay not be very stimulating. The cost of designing such programmes is generallyhigh. It is not suitable for trying to bring about behavioural changes.

9.5 CD-ROMS

Some intranets can also support the delivery of CD-ROM-based training. As CD-ROMprograms continue to become more sophisticated, trainers can learn more about themthrough the use of "authoring" software, which ranges in difficulty from straightforward,template-based programs to more complex applications requiring expert programmingskills.

HRM practitioners and trainers should also have a working knowledge of multimediatechnology. It enhances learning in individual and group settings with audio, animation,graphics, and interactive video delivered via computer. Those capabilities let traineesretrieve information when they want it and in the way that makes the most sense tothem.

Box 9.8: 360-degree Performance Appraisals

ADVANTAGES

1. Provides a more comprehensive view of employee performances.

2. Increases credibility of performance appraisal.

3. Feedback from peers enhances employee’s self-development.

4. Increases accountability of employees to their customers.

DISADVANTAGES

1. Time consuming and more administratively complex.

2. Extensive giving and receiving feedback can be intimidating to some employees.

3. Requires training and significant change effort to work effectively.

9.6 KEY FACTOR FOR SUCCESS

The success of any management development programme largely depends on the selectionof the method. The objectives of the programme should be kept in mind while choosinga particular method. However, no single technique may prove to be sufficient, but only asuitable combination of techniques may yield results.

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Developing ManagersThe following Box 9.9 may help in making a suitable choice:

Box 9.9

Technique Suitability

Job Rotation To develop diversified skills and broaden the outlook of anexecutive

Understudy To aid succession planning by developing the skills ofjuniors according to a pre-set plan

Multiple Management To assist managers in expanding their outlook and knowledgein various functional areas

Case Study To develop analytical, reasoning and problem-solving skills

Role Playing To translate theoretical knowledge into action plans and topromote good human relations skills among trainees

Behaviour Modelling To teach inter-personnel and cognitive skills

In-basket To promote situational judgement and social sensitivity

Business Games To develop smart thinking, quick reactions, initiative,organising and leadership skills

Sensitivity Training To promote self awareness and its impact on others

Conference To improve and expand knowledge, attitudes and developinterpersonal skills

Lecture To impart conceptual knowledge to a large audience within ashort span of time.

Check Your Progress

1. What is meant by executive/management development programme?

2. What are the steps involved in the MDP?

3. Differentiate between Case study method and Business game method.

4. What are specific individual needs?

5. What are the key factors for success in MDP?

9.7 LET US SUM UP

Managers are the indispensable resources, the priceless assets of an organisation. Theygenerate creative ideas, translate them into concrete action plans and produce results.When they succeed, they are able to keep everyone in good humour – includingshareholders, employees and the general public. Executive or management developmentis a planned, systematic and continuous process of learning and growth by which managersdevelop their conceptual and analytical abilities to manage. Management developmentprogrammes help in acquiring and developing different types of managerial skills andknowledge. In addition to job knowledge, managers should also possess knowledge ofvarious jobs, products, markets, finances creditors of the organisation, etc. Some intranetscan also support the delivery of CD-ROM-based training. As CD-ROM programs continueto become more sophisticated, trainers can learn more about them through the use of"authoring" software, which ranges in difficulty from straightforward, template-basedprograms to more complex applications requiring expert programming skills. The successof any management development programme largely depends on the selection of themethod. The objectives of the programme should be kept in mind while choosing aparticular method.

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Human Resource Management 9.8 LESSON-END ACTIVITY

You have just been hired as the new training and development manager in a large privatesector bank. This is a new position in the bank and the senior executives have asked youto attend their executive meeting at the end of the week. You are supposed to give apresentation throwing light on how the training and development of employees wouldhelp reduce the increasing turnover the bank is currently experiencing.

9.9 KEYWORDS

Management Development

Interpersonal Skills

Role Play

Senstivity Training

Job Rotation

Multiple Management

Proframmed Instructions

CD-ROMs


1. Why Management Development has become indispensable to modernOrganisations? Give reasons.

2. What are the important steps in the organisation of Management DevelopmentProgramme?

3. Explain Sensitivity Training?

4. Explain Case Study. What are the merits and demerits of the Case Study Method?

5. What are the techniques of imparting organisational knowledge? Explain.

6. Name off-the-Job Methods.

7. Write notes on following:

(a) CD-Roms

(b) Key factor for success








LESSON

10PERFORMANCE APPRAISAL

CONTENTS


10.1 Introduction

10.2 Definition

10.3 Features

10.4 Methods

10.4.1 Individual Evaluation Methods

10.4.2 Multiple-person Evaluation Techniques

10.5 Problems and Solutions

10.5.1 Solutions

10.5.2 The Appraisal Interviews

10.6 Performance Appraisal in Practice

10.6.1 Performance Appraisal Practices in India

10.7 Let us Sum Up


10.9 Keywords

10.10Questions for Discussion

10.11Suggested Readings


In this lesson we shall discuss about performance appraisal. After going through thislesson you will be able to:

(i) Discuss methods, problems and solutions of performance appraisal.

(ii) Analyse performance appraisal in practice.

10.1 INTRODUCTION

After an employee has been selected for a job, has been trained to do it and has workedon it for a period of time, his performance should be evaluated. Performance Evaluationor Appraisal is the process of deciding how employees do their jobs. Performance hererefers to the degree of accomplishment of the tasks that make up an individual’s job. Itindicates how well an individual is fulfilling the job requirements. Often the term is confused

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Human Resource Management with efforts, which means energy expended and used in a wrong sense. Performance isalways measured in terms of results. A bank employee, for example, may exert a greatdeal of effort while preparing for the CAIIB examination but manages to get a poorgrade. In this case the effort expended is high but performance is low.

10.2 DEFINITION

Performance appraisal is a method of evaluating the behaviour of employees in theworkspot, normally including both the quantitative and qualitative aspects of jobperformance. It is a systematic and objective way of evaluating both work-relatedbehaviour and potential of employees. It is a process that involves determining andcommunicating to an employee how he or she is performing the job and ideally, establishinga plan of improvement.

10.3 FEATURES

The main characteristics of performance appraisal may be listed thus:

i. The appraisal is a systematic process involving three steps:

a. Setting work standards.

b. Assessing employee's actual performance relative to these standards.

c. Offering feedback to the employee so that he can eliminate deficiencies andimprove performance in course of time.

ii. It tries to find out how well the employee is performing the job and tries to establisha plan for further improvement.

iii. The appraisal is carried out periodically, according to a definite plan. It is certainlynot a one shot deal.

iv. Performance appraisal is not a past-oriented activity, with the intention of puttingpoor performers in a spot. Rather, it is a future oriented activity showing employeeswhere things have gone wrong, how to set everything in order, and deliver resultsusing their potential in a proper way.

v. Performance appraisal is not job evaluation. Performance appraisal refers tohow well someone is doing an assigned job. Job evaluation, on the other hand,determines how much a job is worth to the organisation and therefore, what rangeof pay should be assigned to the job.

vi. Performance appraisal is not limited to ‘calling the fouls’. Its focus is on employeedevelopment. It forces managers to become coaches rather then judges. Theappraisal process provides an opportunity to identify issues for discussion, eliminateany potential problems, and set new goals for achieving high performance.

vii. Performance appraisal may be formal or informal. The informal evaluation ismore likely to be subjective and influenced by personal factors. Some employeesare liked better than others and have, for that reason only, better chances of receivingvarious kinds of rewards than others. The formal system is likely to be more fairand objective, since it is carried out in a systematic manner, using printed appraisalforms.

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Performance Appraisal10.4 METHODS

The performance appraisal methods may be classified into three categories, as shown inFigure 10.1.

Figure 10.1: Performance Appraisal Methods

10.4.1 Individual Evaluation Methods

Under the individual evaluation methods of merit rating, employees are evaluated one ata time without comparing them with other employees in the organisation.

1. Confidential report: It is mostly used in government organisations. It is adescriptive report prepared, generally at the end of every year, by the employee’simmediate superior. The report highlights the strengths and weaknesses of thesubordinate. The report is not databased. The impressions of the superior about thesubordinate are merely recorded there. It does not offer any feedback to theappraisee. The appraisee is not very sure about why his ratings have fallen despitehis best efforts, why others are rated high when compared to him, how to rectifyhis mistakes, if any; on what basis he is going to be evaluated next year, etc. Sincethe report is generally not made public and hence no feedback is available, thesubjective analysis of the superior is likely to be hotly contested. In recent years,due to pressure from courts and trade unions, the details of a negative confidentialreport are given to the appraisee.

2. Essay evaluation: Under this method, the rater is asked to express the strong aswell as weak points of the employee’s behaviour. This technique is normally usedwith a combination of the graphic rating scale because the rater can elaboratelypresent the scale by substantiating an explanation for his rating. While preparingthe essay on the employee, the rater considers the following factors: (i) Jobknowledge and potential of the employee; (ii) Employee’s understanding of thecompany’s programmes, policies, objectives, etc.; (iii) The employee’s relationswith co-workers and superiors; (iv) The employee’s general planning, organisingand controlling ability; (v) The attitudes and perceptions of the employee, in general.

Essay evaluation is a non-quantitative technique. This method is advantageous inat least one sense, i.e., the essay provides a good deal of information about theemployee and also reveals more about the evaluator. The essay evaluation methodhowever, suffers from the following limitations:

i. It is highly subjective; the supervisor may write a biased essay. The employeeswho are sycophants will be evaluated more favourably than other employees.

ii. Some evaluators may be poor in writing essays on employee performance.Others may be superficial in explanation and use flowery language whichmay not reflect the actual performance of the employee. It is very difficult tofind effective writers nowadays.

Performance Appraisal Methods

Individual evaluation methods Multiple-person evaluation methods Other methods1. Confidential report 9. Ranking 12. Group Appraisal2. Essay evaluation 10. Paired comparison 13. HRA3. Critical incidents 11. Forced distribution 14. Assessment centre4. Checklists 15. Field review5. Graphic rating scale6. Behaviourally anchored

rating scales7. Forced choice method8. MBO

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Human Resource Management iii. The appraiser is required to find time to prepare the essay. A busy appraisermay write the essay hurriedly without properly assessing the actualperformance of the worker. On the other hand, appraiser takes a long time,this becomes uneconomical from the view point of the firm, because the timeof the evaluator (supervisor) is costly.

3. Critical incident technique: Under this method, the manager prepares lists ofstatements of every effective and ineffective behaviour of an employee. Thesecritical incidents or events represent the outstanding or poor behaviour of employeeson the job. The manager maintains logs on each employee, whereby he periodicallyrecords critical incidents of the workers’ behaviour. At the end of the rating period,these recorded critical incidents are used in the evaluation of the workers’performance. An example of a good critical incident of a sales assistant is thefollowing:

July 20 – The sales clerk patiently attended to the customer’s complaint. He ispolite, prompt, enthusiastic in solving the customer’s problem.

On the other hand, the bad critical incident may appear as under:

July 20 – The sales assistant stayed 45 minutes over on his break during thebusiest part of the day. He failed to answer the store manager’s call thrice.He is lazy, negligent, stubborn and uninterested in work.

This method provides an objective basis for conducting a thorough discussion of anemployee’s performance. This method avoids recently bias (most recent incidentsget too much emphasis). This method suffers, however, from the following limitations:

i. Negative incidents may be more noticeable than positive incidents.

ii. The supervisors have a tendency to unload a series of complaints aboutincidents during an annual performance review session.

iii. It results in very close supervision which may not be liked by the employee.

iv. The recording of incidents may be a chore for the manager concerned, whomay be too busy or forget to do it.

Most frequently, the critical incidents method is applied to evaluate the performanceof superiors .

4. Checklists and weighted checklists: Another simple type of individual evaluationmethod is the checklist. A checklist represents, in its simplest form, a set of objectivesor descriptive statements about the employee and his behaviour. If the rater believesstrongly that the employee possesses a particular listed trait, he checks the item;otherwise, he leaves the item blank. A more recent variation of the checklist methodis the weighted list. Under this, the value of each question may be weighted equallyor certain questions may be weighted more heavily than others. The following aresome of the sample questions in the checklist.

i. Is the employee really interested in the task assigned? Yes/No

ii. Is he respected by his colleagues (co-workers) Yes/No

iii. Does he respect his superiors? Yes/No

iv. Does he follow instructions properly? Yes/No

v. Does he make mistakes frequently? Yes/No

A rating score from the checklist helps the manager in evaluation of the performanceof the employee. The checklist method has a serious limitation. The rater may bebiased in distinguishing the positive and negative questions. He may assign biasedweights to the questions. Another limitation could be that this method is expensiveand time consuming. Finally, it becomes difficult for the manager to assemble,analyse and weigh a number of statements about the employee’s characteristics,contributions and behaviours.

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Performance Appraisal5. Graphic rating scale: Under this method, a printed form, as shown below, is usedto evaluate the performance of an employee. A variety of traits may be used inthese types of rating devices, the most common being the quantity and quality ofwork. The rating scales can also be adapted by including traits that the companyconsiders important for effectiveness on the job. A model of a graphic rating scaleis given below.

Box 10.1: Typical Graphic Rating Scale

Employee Name................... Job title .................Department ......................... Rate ...............Data ..................................

Unsatis- Fair Satis- Good Outstandingfactory factory

l Quantity of workVolume of workunder normalworking conditions

l Quality of workneatness, thoroughnessand accuracy of work

l Knowledge of jobA clear understandingof the factors connectedwith the job

l AttitudeExhibits enthusiasm andcooperativeness on the job

l DependabilityConscientious,thorough, reliable, accurate,with respect to attendance,reliefs, lunch breaks, etc.

l CooperationWillingness and abilityto work with others toproduce desired goals.

From the graphic rating scales, excerpts can be obtained about the performancestandards of employees. For instance, if the employee has serious gaps in technical-professional knowledge (knows only rudimentary phases of job); lacks theknowledge to bring about an increase in productivity; is reluctant to make decisionson his own (on even when he makes decisions they are unreliable and substandard);declines to accept responsibility; fails to plan ahead effectively; wastes and misusesresources; etc., then it can safely be inferred that the standards of performance ofthe employee are dismal and disappointing.

The rating scale is the most common method of evaluation of an employee’sperformance today. One positive point in favour of the rating scale is that it is easyto understand, easy to use and permits a statistical tabulation of scores of employees.When ratings are objective in nature, they can be effectively used as evaluators.The graphic rating scale may, however, suffer from a long standing disadvantage,i.e., it may be arbitrary and the rating may be subjective. Another pitfall is thateach characteristic is equally important in evaluation of the employee’s performanceand so on.

6. Behaviourally anchored rating scales: Also known as the behaviouralexpectations scale, this method represents the latest innovation in performanceappraisal. It is a combination of the rating scale and critical incident techniques ofemployee performance evaluation. The critical incidents serve as anchor statements

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Human Resource Management on a scale and the rating form usually contains six to eight specifically definedperformance dimensions. Figure 8.2 represents a BARS scale for a collegeprofessor.

How to construct BARS? Developing a BARS follows a general format whichcombines techniques employed in the critical incident method and weighted checklistrating scales. Emphasis is pinpointed on pooling the thinking of people who will usethe scales as both evaluators and evaluees.

Step I: Collect critical incidents: People with knowledge of the job to be probed,such as job holders and supervisors, describe specific examples of effective andineffective behaviour related to job performance.

Step II: Identify performance dimensions: The people assigned the task ofdeveloping the instrument, cluster the incidents into a small set of key performancedimensions. Generally, between five and ten dimensions account for most of theperformance. Examples of performance dimensions include technical competence,relationships with customers, handling of paperwork and meeting day-to-daydeadlines. While developing varying levels of performance for each dimension(anchors), specific examples of behaviour should be used, which could later bescaled in terms of good, average or below average performance.

Step III: Reclassification of incidents: Another group of participantsknowledgeable about the job is instructed to retranslate or reclassify the criticalincidents generated (in Step II) previously. They are given the definition of jobdimension and told to assign each critical incident to the dimension that it bestdescribes. At this stage, incidents for which there is lower than 75 per cent agreementare discarded as being too subjective.

Figure 10.2: A Sample Behaviourally Anchored Rating Scale for a College Professor

Organisational Skills:A good constructional order of material slides smoothly from one topic to another; design ofcourse optimises interest; students can easily follow organisational strategy; course outlinefollowed.

Follows a course syllabus;presents lectures in a logicalorder; ties each lecture into theprevious.

Prepares a course syllabus butonly follows it occasionally;presents lectures in noparticular order, although doestie them together.

Makes no use of a coursesyllabus; lectures on topicsrandomly with no logical order.

10 Follows a course syllabus;presents lectures in a logical order;ties each lecture into the previous.

9

8

7

6

5

4

3

2

1

l

l

l

This instructor can be expected toannounce at the end of eachlecture the material that will becovered during the next classperiod.

This instructor could be expectedto be sidetracked at least once aweek in lecture and not cover theintended material.

This instructor could be expectedto lecture a good deal of the timeabout subjects other than thesubject s/he is supposed to lectureon.

l

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Performance AppraisalStep IV: Assigning scale values to the incidents: Each incident is then rated ona one-to-seven or one-to-nine scale with respect of how well it representsperformance on the appropriate dimension. A rating of one represents ineffectiveperformance; the top scale value indicates very effective performance. The secondgroup of participants usually assigns the scale values. Means and standard deviationsare then calculated for the scale values assigned to each incident. Typically, incidentsthat have standard deviations of 1.50 or less (on a 7-point scale) are retained.

Step V: Producing the final instrument: About six or seven incidents for eachperformance dimension – all having met both the retranslating and standard deviationcriteria – will be used as behavioural anchors. The final BARS instrument consistsof a series of vertical scales (one for each dimension) anchored (or measured) bythe final incidents. Each incident is positioned on the scale according to its meanvalue.

Because the above process typically requires considerable employee participation,its acceptance by both supervisors and their subordinates may be greater. Proponentsof BARS also claim that such a system differentiates among behaviour, performanceand results and consequently is able to provide a basis for setting developmentalgoals for the employee. Because it is job-specific and identifies observable andmeasurable behaviour, it is a more reliable and valid method for performanceappraisal.

Researchers, after surveying several studies on BARS, concluded that “despitethe intuitive appeal of BARS, findings from research have not been encouraging”.It has not proved to be superior to other methods in overcoming rater errors or inachieving psychometric soundness. A specific deficiency is that the behavioursused are activity oriented rather than results oriented. This creates a potentialproblem for supervisors doing the evaluation, who may be forced to deal withemployees who are performing the activity but not accomplishing the desired goals.Further, it is time consuming and expensive to create BARS. They also demandseveral appraisal forms to accommodate different types of jobs in an organisation.In a college, lecturers, office clerks, library staff, technical staff and gardeningstaff all have different jobs; separate BARS forms would need to be developed foreach. In view of the lack of compelling evidence demonstrating the superiority ofBARS over traditional techniques such as graphic rating scales, decotis concludedthat: “It may be time to quit hedging about the efficacy of behavioural scalingstrategies and conclude that this method has no clear-cut advantages over moretraditional and easier methods of performance evaluation”.

7. Forced choice method: This method was developed to eliminate bias and thepreponderance of high ratings that might occur in some organisations. The primarypurpose of the forced choice method is to correct the tendency of a rater to giveconsistently high or low ratings to all the employees. This method makes use ofseveral sets of pair phrases, two of which may be positive and two negative andthe rater is asked to indicate which of the four phrases is the most and least descriptiveof a particular worker. Actually, the statement items are grounded in such a waythat the rater cannot easily judge which statements apply to the most effectiveemployee. The following Table is a classic illustration of the forced choice items inorganisations.

Box 10.2

1. Least MostA Does not anticipate difficulties AB Grasps explanations easily and quickly BC Does not waste time CD Very easy to talk to D

2. Least MostA Can be a leader AB Wastes time on unproductive things BC At all times, cool and calm CD Smart worker D

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Human Resource Management The favourable qualities earn a plus credit and the unfavourable ones earn thereverse. The worker gets an overall plus rating, when the positive factors overridethe negative ones or when one of the negative phrases is checked as beinginsignificantly rated.

They overall objectivity is increased by using this method in evaluation of employee’sperformance, because the rater does not know how high or low he is evaluating theindividual as he has no access to the scoring key. This method, however, has astrong limitation. In the preparation of sets of phrases trained technicians are neededand as such the method becomes very expensive. Further, managers may feelfrustrated rating the employees ‘in the dark’. Finally, the results of the forcedchoice method may not be useful for training employees because the rater himselfdoes not know how he is evaluating the worker. In spite of these limitations, theforced choice technique is quite popular.

8. Management by Objectives (MBO): MBO requires the management to set specific,measurable goals with each employee and then periodically discuss the latter'sprogress towards these goals. This technique emphasises participatively set goals(that are agreed upon by the superior and the employee) that are tangible, verifiableand measurable. MBO focuses attention on what must be accomplished (goals)rather than how it is to be accomplished. It is, thus, a kind of goal setting andappraisal programme involving six steps:

i. Set the organisation’s goals: Establish an organisationwide plan for nextyear and set company goals.

ii. Set departmental goals: Departmental heads at this stage take the broadercompany goals (such as improving profits by 20 per cent, increasing marketshare by 10 per cent etc.) and, with their superiors, jointly set goals for theirdepartments.

iii. Discuss departmental goals: The departmental goals are now put todiscussion in a departmental meeting with subordinates. The departmentalheads would require the subordinates to set their own preliminary individualgoals, focusing mostly on what they can do to achieve the department's goals.

iv. Define expected results: In the next step, the departmental heads and theirsubordinates agree on a set of participatorily set short term, and individualperformance targets.

v. Performance reviews: Departmental heads compare each employee's actualand targeted performance, either periodically or annually. While periodic reviewis intended to identify and solve specific performance problems, the annualreview is conducted to assess and reward one’s overall contribution to theorganisation. Because employees are evaluated on their performance results,MBO is often called a result-based performance appraisal system.

v. Provide feedback: Both parties now discuss and evaluate the actual progressmade in achieving goals, where things have gone off the track, how best torectify the mistakes made in the past, and how the employee could meet thetargets next time, focusing attention on his strengths.

However, setting clearly measurable goals is not an easy task. MBO demands agreat deal of time to set verifiable goals at all levels of an organisation. In the raceto define everything rigidly, some of the qualitative aspects might be ignored (suchas employee attitudes, job satisfaction etc). Often the superior may set goals at afrustratingly high level, whereas the subordinate may wish to have it at a comfortablelevel. At times, the short-term goals may take precedence over long term goal.The only way to overcome these problems is to allow managers at all levels to

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Performance Appraisalexplain, coordinate and guide the programme in a persuasive, democratic way. Thejointly set targets must be fair and attainable. Both the superiors and the subordinatesmust be taught how to set realistic goals and be familiarised with the results forwhich they are finally held responsible.

10.4.2 Multiple-person Evaluation Techniques

The above discussed methods are used to evaluate employees one at a time. In thissection, let us discuss some techniques of evaluating one employee in comparisonto another. Three such frequently used methods in organisations are – ranking,paired comparison and forced distribution.

1. Ranking method: This is a relatively easy method of performance evaluation.Under this method, the ranking of an employee in a work group is done against thatof another employee. The relative position of each employee is expressed in termsof his numerical rank. It may also be done by ranking a person on his job performanceagainst another member of the competitive group. The quintessence of this methodis that employees are ranked according to their relative levels of performance.While using this method, the evaluator is asked to rate employees from highest tolowest on some overall criterion. Though it is relatively easier to rank the best andthe worst employees, it is very difficult to rank the average employees. Generally,evaluators pick the top and bottom employees first and then select the next highestand next lowest and move towards the average (middle) employees. The longstandinglimitations of this method are:

i. The ‘whole man’ is compared with another ‘whole man’ in this method. Inpractice, it is very difficult to compare individuals possessing varied behaviouraltraits.

ii. This method speaks only of the position where an employee stands in hisgroup. It does not tell anything about how much better or how much worse anemployee is when compared to another employee.

iii. When a large number of employees are working, ranking of individualsbecomes a vexing issue.

iv. There is no systematic procedure for ranking individuals in the organisation.The ranking system does not eliminate the possibility of snap judgements.

In order to overcome the above limitations, a paired comparison technique hasbeen advanced by organisational scholars.

2. Paired comparison method: Ranking becomes more reliable and easier underthe paired comparison method. Each worker is compared with all other employeesin the group; for every trait, the worker is compared with all other employees. Forinstance, when there are five employees to be compared, then A’s performance iscompared with that of B’s and decision is arrived at as to whose is better or worse.Next, B is also compared with all others. Since A is already compared with B, thistime B is to be compared with only C, D and E. By this method, when there arefive employees, fifteen decisions are made (comparisons). The number of decisionsto be made can be determined with the help of the formulae n (n-2). Ranking theemployees by the paired comparison method may be illustrated as shown in theBox 10.3.

For several individual traits, paired comparisons are made, tabulated and then rankis assigned to each worker. Though this method seems to be logical, it is notapplicable when a group is large. When the group becomes too large, the numberof comparisons to be made may become frighteningly excessive. For instance,when n=100, comparisons to be made are 100 (100-2) = 100 (98) = 9800.

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Human Resource Management Trait: ‘Quantity of work’

Box 10.3: Employee Rated

3. Forced distribution method: Under this system, the rater is asked to appraise theemployee according to a predetermined distribution scale. The rater’s bias is soughtto be eliminated here because workers are not placed at a higher or lower end ofthe scale. Normally, the two criteria used here for rating are the job performanceand promotability. Further, a five-point performance scale is used without any mentionof descriptive statements. Workers are placed between the two extremes of ‘good’and ‘bad’ performances. For instance, the workers of outstanding merit may beplaced at the top 10% of the scale. The rest may be placed as – 20% —good, 40%—outstanding, 20% —fair and 10% —poor. To be specific, the forced distributionmethod assumes that all top grade workers should go to the highest 10% grade;20% employees should go to the next highest grade and so on.

Apart from job performance as the criterion, another equally important factor inthis method is promotability. Employees may be classified according to theirpromotional merits. The scale for this purpose may consist of three points – namely,quite likely promotional material, may/may not be promotional material and quiteunlikely promotional material.

One strong positive point in favour of the forced distribution method is that byforcing the distribution according to predetermined percentages, the problem ofmaking use of different raters with different scales is avoided. Further, this methodis appreciated on the ground that it tends to eliminate rater bias. The limitation ofusing this method in salary administration however, is that it may result in lowmorale, low productivity and high absenteeism. Employees who feel that they areproductive, but find themselves placed in a grade lower than expected feel frustratedand exhibit, over a period of time, reluctance to work.

other methods of appraising performance include: Group Appraisal, Human ResourceAccounting, Assessment Centre, Field Review, etc. These are discussed in thefollowing sections:

4. Group appraisal: In this method, an employee is appraised by a group of appraisers.This group consists of the immediate supervisor of the employee, other supervisorswho have close contact with the employee’s work, manager or head of thedepartment and consultants. The head of the department or manager may be theChairman of the group and the immediate supervisor may act as the Coordinatorfor the group activities. This group uses any one of multiple techniques discussedearlier. The immediate supervisor enlightens other members about the jobcharacteristics, demands, standards of performance, etc. Then the group appraisesthe performance of the employee, compares the actual performance with standards,finds out the deviations, discusses the reasons therefor, suggests ways forimprovement of performance, prepares an action plan, studies the need for changein the job analysis and standards and recommends changes, if necessary.

This method eliminates ‘personal bias’ to a large extent, as performance is evaluatedby multiple raters. But it is a very time consuming process.

As compared to A B C D E

A + – + –

B – + – +

C + – + –

D – + – –

E + – + +

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Performance Appraisal5. Human resource accounting: HRA is a sophisticated way to measure (in financialterms) the effectiveness of personnel management activities and the use of peoplein an organisation. It is the process of accounting for people as an organisationalresource. It tries to place a value on organisational human resources as assets andnot as expenses. The HRA process shows the investment the organisation makesin its people and how the value of these people changes over time. The acquisitioncost of employees is compared to the replacement cost from time to time. Thevalue of employees is increased by investments made by the company to improvethe quality of its human resources such as training, development, and skills acquiredby employees over a period of time through experience, etc. When qualified,competent people leave an organisation, the value of human assets goes down. Inthis method, employee performance is evaluated in terms of costs and contributionsof employees. Human resource costs include expenditure incurred by the companyin hiring, training, compensating and developing people. The contributions of humanresources is the money value of labour productivity. The cost of human resourcesmay be taken as the standard. Employee performance can be measured in termsof employee contribution to the organisation. Employee performance can be takenas positive when contribution is more than the cost and performance can be viewedas negative if cost is more than contribution. Positive performance can be measuredin terms of percentage of excess of employee contribution over the cost ofemployee. Similarly negative performance can be calculated in terms of percentageof deficit in employee contribution compared to the cost of employee. Thesepercentages can be ranked to ‘Zero Level’ as shown in the Box 10.4.

Box 10.4

Rank Rating Percentage of surplus/Deficit ofcontribution to cost of employee

1. Extremely good performance Over 200

2. Good performance 150 – 200

3. Slightly good performance 100 – 150

4. Neither poor nor good 0 – 100

5. Slightly poor performance 0

6. Poor performance 0 to (– 50)

7. Extremely poor performance (–50) to (–100)

This technique has not developed fully and is still in the transitionary stage.

6. Assessment centre: This method of appraising was first applied in German Armyin 1930. Later business and industrial houses started using this method. This is nota technique of performance appraisal by itself. In fact it is a system or organisation,where assessment of several individuals is done by various experts using varioustechniques. These techniques include the methods discussed before in addition toin-basket, role playing, case studies, simulation exercises, structured in sight,transactional analysis, etc.

In this approach, individuals from various departments are brought together to spendtwo or three days working on individual or group assignments similar to the onesthey would be handling when promoted. Observers rank the performance of eachand every participant in order of merit. Since assessment centres are basicallymeant for evaluating the potential of candidates to be considered for promotion,training or development, they offer an excellent means for conducting evaluationprocesses in an objective way. All assessees get an equal opportunity to show theirtalents and capabilities and secure promotion based on merit. Since evaluatorsknow the position requirements intimately and are trained to perform the evaluation

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Human Resource Management process in an objective manner, the performance ratings may find favour with amajority of the employees. A considerable amount of research evidence is availableto support the contention that people chosen by this method prove better than thosechosen by other methods. The centre enables individuals working in low statusdepartments to compete with people from well-known departments and enlargetheir promotion chances. Such opportunities, when created on a regular basis, willgo a long way in improving the morale of promising candidates working in ‘lessimportant’ positions.

7. Field review method: Where subjective performance measures are used, there isscope for rater’s biases influencing the evaluation process. To avoid this, someemployees use the field review method. In this method, a trained, skilledrepresentative of the HR department goes into the ‘field’ and assists line supervisorswith their ratings of their respective subordinates. The HR specialist requests fromthe immediate supervisor specific information about the employees performance.Based on this information, the expert prepares a report which is sent to the supervisorfor review, changes, approval and discussion with the employee who is being rated.The ratings are done on standardised forms.

10.5 PROBLEMS AND SOLUTIONS

The problems inherent in performance appraisal may be listed thus:

1. Judgement errors: People commit mistakes while evaluating people and theirperformance. Biases and judgement errors of various kinds may spoil the show.Bias here refers to distortion of a measurement. These are of various types:

i. First impressions (primacy effect): The appraiser’s first impression of acandidate may colour his evaluation of all subsequent behaviour. In the caseof negative primacy effect, the employee may seem to do nothing right; in thecase of a positive primacy effect, the employee can do no wrong(Harris, p.192).

ii. Halo: The Halo error occurs when one aspect of the subordinate’sperformance affects the rater’s evaluation of other performance dimensions.If a worker has few absences, his supervisor might give the worker a highrating in all other areas of work. Similarly, an employee might be rated highon performance simply because he has a good dress sense and comes tooffice punctually!

iii. Horn effect: The rater’s bias is in the other direction, where one negativequality of the employee is being rated harshly. For example, the ratee rarelysmiles, so he cannot get along with people!

iv. Leniency: Depending on rater’s own mental make-up at the time of appraisal,raters may be rated very strictly or very leniently. Appraisers generally findevaluating others difficult, especially where negative ratings have to be given.A professor might hesitate to fail a candidate when all other students havecleared the examination. The leniency error can render an appraisal systemineffective. If everyone is to be rated high, the system has not done anythingto differentiate among employees.

v. Central tendency: An alternative to the leniency effect is the central tendency,which occurs when appraisers rate all employees as average performers.For example, a professor, with a view to play it safe, might give a class gradesnearly equal to B, regardless of the differences in individual performance.

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Performance Appraisalvi. Stereotyping: Stereotyping is a mental picture that an individual holds abouta person because of that person’s sex, age, religion, caste, etc. By generalisingbehaviour on the basis of such blurred images, the rater grossly overestimatesor underestimates a person’s performance. For example, employees fromrural areas might be rated poorly by raters having a sophisticated urbanbackground, if they view rural background negatively.

vii. Recency effect: In this case, the rater gives greater weightage to recentoccurrences than earlier performance. For example, an excellent performancethat may be six or seven months old is conveniently forgotten while giving apoor rating to an employee’s performance which is not so good in recentweeks. Alternatively, the appraisal process may suffer due to a ‘spill overeffect’ which takes place when past performance influences present ratings.

2. Poor appraisal forms: The appraisal process might also be influenced by thefollowing factors relating to the forms that are used by raters:

l The rating scale may be quite vague and unclear

l The rating form may ignore important aspects of job performance.

l The rating form may contain additional, irrelevant performance dimensions.

l The forms may be too long and complex.

3. Lack of rater preparedness: The raters may not be adequately trained to carryout performance management activities. This becomes a serious limitation whenthe technical competence of a ratee is going to be evaluated by a rater who haslimited functional specialisation in that area. The raters may not have sufficienttime to carry out appraisals systematically and conduct thorough feedback sessions.Sometimes the raters may not be competent to do the evaluations owing to a poorself-image and lack of self-confidence. They may also get confused when theobjectives of appraisal are somewhat vague and unclear.

4. Ineffective organisational policies and practices: If the sincere appraisal effort putin by a rater is not suitably rewarded, the motivation to do the job thoroughly finishesoff. Sometimes, low ratings given by raters are viewed negatively by management– as a sign of failure on the part of rater or as an indication of employee discontent.So, most employees receive satisfactory ratings, despite poor performance. Normally,the rater’s immediate supervisor must approve the ratings. However, in actualpractice, this does not happen. As a result, the rater ‘goes off the hook’ and causesconsiderable damage to the rating process.

10.5.1 Solutions

The following are some of the steps required to be followed while introducing a potentialappraisal system:

1. Role Descriptions: Organisational roles and functions must be defined clearly. Tothis end, job descriptions must be prepared for each job.

2. Qualities needed to perform the roles: Based on job descriptions, the roles to beplayed by people must be prepared (i.e., technical, managerial jobs and behaviouraldimensions).

3. Rating mechanisms: Besides listing the functions and qualities, the potentialappraisal system must list mechanisms of judging the qualities of employees suchas:

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Human Resource Management i. Rating by others: The potential of a candidate could be rated by the immediatesupervisor who is acquainted with the candidate’s work in the past, especiallyhis technical capabilities.

ii. Tests: Managerial and behavioural dimensions can be measured through abattery of psychological tests.

iii. Games: Simulation games and exercises (assessment centre, business games,in-basket, role play, etc.) could be used to uncover the potential of a candidate.

iv. Records: Performance records and ratings of a candidate on his previousjobs could be examined carefully on various dimensions such as initiative,creativity, risk taking ability, etc., which might play a key role in discharginghis duties in a new job.

l Organising the system

After covering the above preliminaries, the HR manager must set up a system thatwill allow the introduction of the scheme smoothly incorporating answers to somecomplex questions such as:

i. How much weightage to accord to merit in place of seniority in promotions?

ii. How much weightage to accord to each of the performance dimensions –technical, managerial, behavioural qualities?

iii. What are the mechanisms of assessing the individual on different indicatorsof his potential, and with what degree of reliability?

l Feedback

The system must provide an opportunity for every employee to know the results ofhis assessment. “He should be helped to understand the qualities actually requiredfor performing the role for which he thinks he has the potential, the mechanismsused by the organisations to appraise his potential and the results of such anappraisal”.

10.5.2 The Appraisal Interviews

The post appraisal interview is an essential part of the performance appraisal system.The employee gets useful feedback information about how effectively and efficiently heis able to discharge the assigned duties. It also gives the opportunity to the employee toexplain his views about the ratings, standards, rating methods, internal and external causesfor low level of performance. The appraiser gets a chance to explain the employee hisrating, the traits and behaviours he has taken into account for appraisal, etc. He canutilise this opportunity to offer constructive suggestions, and help, guide and coach theemployee for his advancement. The post appraisal interview helps both parties to reviewstandards, and set new standards based on the experience gained. It, thus, serves tomeet the following objectives:

1. to let employees know where they stand;

2. to help employees do a better job by clarifying what is expected of them;

3. to plan opportunities for development and growth;

4. to strengthen the superior-subordinate working relationship by developing a mutualagreement of goals;

5. to provide an opportunity for employees to express themselves on performance-related issues.

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Performance Appraisal10.6 PERFORMANCE APPRAISAL IN PRACTICE

Leading Indian companies like Philips, Glaxo, Cadbury, Sandoz, Pfizer, Mafatlal, Proctorand Gamble have all redesigned their systems in recent times, shifting from a pureperformance orientation to a potential-cum-performance based appraisal system. ThePhilips model, in this connection, is worth mentioning, shown below.

a. Low potential-low performance: Employees with low potential and lowperformance levels (‘question marks’) are asked to improve their performanceinitially. If that effort fails, Philips works towards a planned separation

b. Low potential-high performance: Defined as solid citizens-high skills but limitedcapability to grow beyond their current job profile-they constitute 70 to 75 per centof the company’s employees. The company has to constantly recognise theirlimitations and look after their needs.

c. Low performance-high potential: These are the problem children. In most cases,they do well in their jobs – if a location, boss or job profile is changed. To tap theirpotential, such employees are given a new scenario to work in and are closelyobserved. If they continue to show low performance, the separation process isinitiated.

d. High performance-high potential: They are the star performers and ought to bepampered like race horses – putting them on challenging tasks constantly.

Philips uses a five-point scale to measure the potential of an employee and put him intoone of the above quadrants. The potential appraisal criteria include the following:1. Conceptual effectiveness (including vision, business orientation, entrepreneurialorientation, sense of reality), 2. Interpersonal effectiveness (network directedness,negotiating power, personal influence, verbal behaviour), 3. Operational effectiveness(result orientation, individual effectiveness, risk-taking, control), 4. AchievementMotivation (drive, professional ambition, innovativeness, stability). Once the potentialof an employee is measured along these dimensions on a five-point scale, Philips laysdown a fast-track, career growth plan for the star performers. (5 year to 10 year plan).Companies like Glaxo, Cadbury have similar processes in place to separate the starperformers from the employee ranks and exploit their potential fully using rewards andincentive schemes to good effect.

10.6.1 Performance Appraisal Practices in India

There are three different approaches for carrying out appraisals. Employers can beappraised against (i) absolute standards (where employees’ performance is measuredagainst some established standards; the subjects here are not compared with any otherperson) (ii) relative standards (where the subjects are compared against other individuals)and (iii) objective. Here, employees are evaluated by how well they accomplish a specificset of objectives that have been determined to be critical in the successful completion oftheir job. No one approach is always best; each has its strengths and weaknesses. Ofcourse, a successful performance appraisal system requires more than good technique.It depends on a consistent approach for comparability of results, clear standards andmeasures, and bias-free ratings. Against this backdrop, let's see how some of the leadingcompanies in India carry out the appraisal process.

i. Hughes Escorts: Hughes Escorts, the subsidiary of the US-headquartered telecomcompany, Hughes, uses a competency-based performance-enhancement model.Each position in the organisation is defined in terms of 23 key competencies,categorised into four groups: attitude-based, knowledge-driven, skill-centred, and

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Human Resource Management value based. The company uses these competencies to measure shortfalls andprovide relevant training inputs. This is done to both maximise productivity andmake employees aware of their professional standing.

ii. National Panasonic: This Japanese white-goods major has developed aperformance-assessment system driven by key result areas (KRAs). KRAs describeperformance goals – business, functional, and behavioural ones – with definedtime-frames and are decided jointly by the employee and the manager at thebeginning of the year. It is a structured exercise using a written format. TheseKRAs are then used to map the employee's progress and, based on the results, thecompany decides to plug performance gaps with the help of relevant training inputs.National Panasonic puts a great deal of emphasis on this process for re-skilling itsemployees as it believes in growing its own timber rather than opting for expensivemid-career hires.

iii. Larsen & Toubro: Engineering major Larsen & Toubro has developed acompetency matrix which lists 73 competencies – that vary across manageriallevels – to measure performance and gauge development needs of its employees.Each listed competency has associated knowledge, skills, and attributes. Thecompany appraises individual employees in the listed competencies, and zeroes inon the functional, managerial, and behavioural skill gaps. Subsequently, customisedreinforcement is provided. Further, as the matrix is linked to business strategy onthe one hand and training needs on the other, strategic needs drive the company'sdevelopment policies, making the process of re-learning and re-skilling easier, andmore focused.

iv. Daewoo Motors: Auto major Daewoo Motors Ltd. has introduced a parameter onteam work in its appraisal process. Targets are set according to business plans inthe beginning of the year and assigned to various functional teams. Subsequently,the team's performance is measured on the basis of its achievement vis-à-vis itsgoals. This done, the top management allocates ratings (which can vary fromoutstanding to average) to each team. In a parallel process, the team-supervisorappraises each team member. Both ratings are taken into account before a finalrating is assigned by the senior management team to each functional team andevery team member. Rewards, including performance increments, bonuses, andpromotions are given out on the basis of this final rating.

v. EIH Ltd.: Hospitality company EIH recently overhauled its performance appraisalsystem to make it more participatory and competency-driven. Now, employees areappraised on the achievement of specific individual and functional targets, as wellas generic competencies like technical, functional, managerial, decision-making,and leadership skills. Performance ratings ranging from outstanding to below-average are given accordingly. The exercise is followed by an employee feedbackprocess, where employees are required to answer. EIH had taken its managersthrough an extensive tour of its new appraisal process to raise comfort levels, andhopes to use its as a vehicle for people-based growth.

vi. Pepsi Co. India: Beverage giant Pepsi Co. (India) employs an annual appraisalprocess that is (numerical) target driven. As a large part of Pepsi's compensationpackage comprises performance pay in the form of bonuses – varying from 15 percent at junior levels to 60-plus per cent at senior rungs – the manager's performanceis determined on three key parameters: volume growth, marketshare, and netoperating profit, to compute the variable component to compensation. Managersare also rated on key behavioural and functional competencies to assess theirpotential for advancement within the organisation.

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Performance AppraisalCheck Your Progress

1. Fill in the blanks.

(a) Performance appraisal is a method of ...................... the behaviour of employeein the organisaiton.

(b) In ...................... evaluation, the rater is asked to express the strong as well asweak points of the employee’s behaviour.

(c) In critical incident technique the ...................... prepares the lists of statement ofevery effective and his effective behaviour of an employee.

(d) ...................... represent a set of objectives or descriptive statements about theemployee and his behaviour.

(e) The method to eliminate bias & the preponderance of high rating is called...................... method.


(a) Ranging Method (i) HR specialist move to fields.

(b) Field review method (ii) Halo effect

(c) Judgement errors (iii) Relative position of employee isexpressed in numerical ranks.

(d) Performance appraisal (iv) Redesigning to further one’s career

(e) Leveraging (v) Chance to express his rating

10.7 LET US SUM UP

Performance Evaluation or Appraisal is the process of deciding how employees do theirjobs. Performance appraisal is a method of evaluating the behaviour of employees in theworkspot, normally including both the quantitative and qualitative aspects of jobperformance.

The performance appraisal methods may be classified into three categories, i.e. Individualevaluation methods, Multiple-person evaluation methods, Other methods.

Forced choice method was developed to eliminate bias and the preponderance of highratings that might occur in some organisations.

Management by Objectives (MBO) technique emphasises participatively set goals (thatare agreed upon by the superior and the employee) that are tangible, verifiable andmeasurable.

The problems inherent in performance appraisal may be listed as:

Judgement errors, Poor appraisal forms, Lack of rater preparedness, Ineffectiveorganisational policies and practices.

There are three different approaches for carrying out appraisals. Employers can beappraised against (i) absolute standards (where employees’ performance is measuredagainst some established standards; the subjects here are not compared with any otherperson) (ii) relative standards (where the subjects are compared against other individuals)and (iii) objective.

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Human Resource Management 10.8 LESSON-END ACTIVITIES

(i) Working individually or in groups, develop, over a period of a week, a set of criticalincidents covering the classroom performance of one of your teachers.

(ii) Develop a thirty-minute presentation about the purposes of the performancemanagement systems: who benefits, the basic six steps–clarify the differencebetween relative and absolute standards, possible distortions and introduce the 360-degree feedback system.

10.9 KEYWORDS

Confidential Report

Graphic Rating Scale

Forced Choice Method

MBO

Group Appraisal

Assessment Centre


1. Define Performance Appraisal.

2. List out the main characteristic of Performance appraisal.

3. What are the three categories in which Performance appraisal methods can beclassified?

4. Write a short note on:

(a) Graphic Rating Scale

(b) The Appraisal Interview

(c) Forced Choice Method

(d) MBO








LESSON

11MANAGING CAREERS

CONTENTS


11.1 Introduction

11.2 Career Planning and Developing

11.2.1 Career Planning vs. Human Resource Planning

11.2.2 Need for Career Planning

11.2.3 Objectives

11.2.4 Process

11.3 Career Development

11.3.1 Individual Career Development

11.3.2 Organisational Career Development

11.4 Let us Sum Up


11.6 Keywords




In this lesson we shall discuss about managing careers. After going through this lessonyou will be able to:

(i) Analyse career planning and developing.

(ii) Discuss career development.

11.1 INTRODUCTION

A career is a sequence of positions held by a person during the course of a lifetime.People pursue careers to satisfy deeply individual needs. Career planning is the processby which one selects career goals and the path to these goals. Career planning is not asure bet, but without it, employees are seldom ready for the career opportunities thatarise.

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Human Resource Management 11.2 CAREER PLANNING AND DEVELOPING

Career planning is the process by which one selects career goals and the path to thesegoals. The major focus of career planning is on assisting the employees achieve a bettermatch between personal goals and the opportunities that are realistically available in theorganisation. Career programmes should not concentrate only on career growthopportunities. Practically speaking, there may not be enough high level positions to makeupward mobility a reality for a large number of employees. Hence, career-planningefforts need to pin-point and highlight those areas that offer psychological success insteadof vertical growth.

Career planning is not an event or end in itself, but a continuous process of developinghuman resources for achieving optimum results. It must, however, be noted that individualand organisational careers are not separate and distinct. A person who is not able totranslate his career plan into action within the organisation may probably quit the job, ifhe has a choice. Organisations, therefore, should help employees in career planning sothat both can satisfy each other’s needs.

11.2.1 Career Planning vs Human Resource Planning

Human Resource planning is the process of analysing and estimating the need for andavailability of employees. Through Human Resource planning, the Personnel departmentis able to prepare a summary of skills and potentials available within the organisation.Career planning assists in finding those employees who could be groomed for higherlevel positions, on the strength of their performance.

Human Resource planning gives valuable information about the availability of humanresources for expansion, growth, etc. (expansion of facilities, construction of a newplant, opening a new branch, launching a new product, etc.). On the other hand, careerplanning only gives us a picture of who could succeed in case any major developmentsleading to retirement, death, resignation of existing employees.

Human Resource planning is tied to the overall strategic planning efforts of the organisation.There cannot be an effective manpower planning, if career planning is not carried outproperly.

11.2.2 Need for Career Planning

Every employee has a desire to grow and scale new heights in his workplace continuously.If there are enough opportunities, he can pursue his career goals and exploit his potentialfully. He feels highly motivated when the organisation shows him a clear path as to howhe can meet his personal ambitions while trying to realise corporate goals. Unfortunately,as pointed out by John Leach, organisations do not pay adequate attention to this aspectin actual practice for a variety of reasons. The demands of employees are not matchedwith organisational needs, no effort is made to show how the employees can grow withincertain limits, what happens to an employee five years down the line if he does well,whether the organisation is trying to offer mere jobs or long-lasting careers, etc. Whenrecognition does not come in time for meritorious performance and a certain amount ofconfusion prevails in the minds of employees whether they are ‘in’ with a chance togrow or not, they look for greener pastures outside. Key executives leave in frustrationand the organisation suffers badly when turnover figures rise. Any recruitment effortmade in panic to fill the vacancies is not going to be effective. So, the absence of acareer plan is going to make a big difference to both the employees and the organisation.Employees do not get right breaks at a right time; their morale will be low and they arealways on their toes trying to find escape routes.

Organisations are not going to benefit from high employee turnover. New employeesmean additional selection and training costs. Bridging the gaps through short-term

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Managing Careersreplacements is not going to pay in terms of productivity. Organisations, therefore, try toput their career plans in place and educate employees about the opportunities that existinternally for talented people. Without such a progressive outlook, organisations cannotprosper.

11.2.3 Objectives

Career planning seeks to meet the following objectives:

i. Attract and retain talent by offering careers, not jobs.

ii. Use human resources effectively and achieve greater productivity.

iii. Reduce employee turnover.

iv. Improve employee morale and motivation.

v. Meet the immediate and future human resource needs of the organisation on atimely basis.

11.2.4 Process

The career planning process involves the following steps:

i. Identifying individual needs and aspirations: Most individuals do not have aclear cut idea about their career aspirations, anchors and goals. The human resourceprofessionals must, therefore, help an employee by providing as much informationas possible showing what kind of work would suit the employee most, taking hisskills, experience, and aptitude into account. Such an assistance is extended throughworkshops/seminars while the employees are subjected to psychological testing,simulation exercises, etc. The basic purpose of such an exercise is to help anemployee form a clear view about what he should do to build his career within thecompany. Workshops and seminars increase employee interest by showing thevalue of career planning. They help employees set career goals, identify careerpaths and uncover specific career development activities (discussed later). Theseindividual efforts may be supplemented by printed or taped information. To assistemployees in a better way, organisations construct a data bank consisting ofinformation on the career histories, skill evaluations and career preferences of itsemployees (known as skill or talent inventory).

ii. Analysing career opportunities: Once career needs and aspirations of employeesare known, the organisation has to provide career paths for each position. Careerpaths show career progression possibilities clearly. They indicate the variouspositions that one could hold over a period of time, if one is able to perform well.Career paths change over time, of course, in tune with employee’s needs andorganisational requirements. While outlining career paths, the claims of experiencedpersons lacking professional degrees and that of young recruits with excellent degreesbut without experience need to be balanced properly.

iii. Aligning needs and opportunities: After employees have identified their needsand have realised the existence of career opportunities the remaining problem isone of alignment. This process consists of two steps: first, identify the potential ofemployees and then undertake career development programmes (discussed lateron elaborately) with a view to align employee needs and organisational opportunities.Through performance appraisal, the potential of employees can be assessed tosome extent. Such an appraisal would help reveal employees who need furthertraining, employees who can take up added responsibilities, etc. After identifyingthe potential of employees certain developmental techniques such as specialassignments, planned position rotation, supervisory coaching, job enrichment,understudy programmes can be undertaken to update employee knowledge andskills.

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Human Resource Management iv. Action plans and periodic review: The matching process would uncover gaps.These need to be bridged through individual career development efforts andorganisation supported efforts from time to time. After initiating these steps, it isnecessary to review the whole thing every now and then. This will help the employeeknow in which direction he is moving, what changes are likely to take place, whatkind of skills are needed to face new and emerging organisational challenges. Froman organisational standpoint also, it is necessary to find out how employees aredoing, what are their goals and aspirations, whether the career paths are in tunewith individual needs and serve the overall corporate objectives, etc.

11.3 CAREER DEVELOPMENT

Career development consists of the personal actions one undertakes to achieve a careerplan. The terms ‘career development’ and ‘employee development’ need to bedifferentiated at this stage. Career development looks at the long-term careereffectiveness of employees, whereas employee development focuses on effectivenessof an employee in the immediate future. The actions for career development may beinitiated by the individual himself or by the organisation. These are discussed below.

11.3.1 Individual Career Development

Career progress and development is largely the outcome of actions on the part of anindividual. Some of the important steps that could help an individual cross the hurdles onthe way ‘up’ may include:

i. Performance: Career progress rests largely on performance. If the performanceis sub-standard, even modest career goals can’t be achieved.

ii. Exposure: Career development comes through exposure, which implies becomingknown by those who decide promotions, transfers and other career opportunities.You must undertake actions that would attract the attention of those who mattermost in an organisation.

iii. Networking: Networking implies professional and personal contacts that wouldhelp in striking good deals outside (e.g., lucrative job offers, business deals, etc.).For years men have used private clubs, professional associations, old-boy networks,etc., to gain exposure and achieve their career ambitions.

iv. Leveraging: Resigning to further one’s career with another employer is known asleveraging. When the opportunity is irresistible, the only option left is to resign fromthe current position and take up the new job (opportunity in terms of better pay,new title, a new learning experience, etc.). However, jumping too jobs frequently(job-hopping) may not be a good career strategy in the long run.

Box 11.1: Network Smart to Get a Dream Job

The corporate world is always on the look out for good people. However, to get that dream job, youneed to be at the right place, at the right time. In short, you need to network smart to create space foryourself – thus:

l Make sure you know the right people, who can recommend your name to the decision makersin the company in which you are eyeing your dream job.

l Go out, attend seminars, and entertain your contacts. Your networked corporate friends couldbecome your buddies, who would go all out to help you, including getting you a better job.

l Remember birthdays, anniversaries of your contacts. This helps add just a little personaltouch to the relationship.

l Where a reference works out, be sure to say thanks. This cements your relationship.

l Be ready to help others when the time comes.

(A. Mittal, Collectors Series, Business World, 21.1.2002 and M.H. McCormack, “Building an Army ofAllies”, B. Today, 7.4.1999.)

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Managing Careersv. Loyalty to career: Professionals and recent college graduates generally jump jobsfrequently when they start their career. They do not think that career-long dedicationto the same organisation may not help them further their career ambitions. Toovercome this problem, companies such as Infosys, NIIT, WIPRO (all informationtechnology companies where the turnover ratios are generally high) have come outwith lucrative, innovative compensation packages in addition to employee stockoption plans for those who remain with the company for a specified period.

vi. Mentors and sponsors: A mentor is, generally speaking, an older person in amanagerial role offering informal career advice to a junior employee. Mentors takejunior employees as their protégés and offer advice and guidance on how to surviveand get ahead in the organisation. They act as role models. A sponsor, on the otherhand, is someone in the organisation who can create career developmentopportunities.

vii. Key subordinates: Qualified and knowledgeable subordinates, often extendinvaluable help that enables their bosses to come up in life. When the bosses crossthe bridge, they take the key subordinates also along with them. In his own selfinterest, the subordinate must try to find that winning horse on which he can bet.

viii. Expand ability: Employees who are career conscious must prepare themselvesfor future opportunities that may come their way internally or externally by takinga series of proactive steps (e.g., attending a training programme, acquiring a degree,updating skills in an area, etc.).

Box 11.2: Avoid Big career Mistakes - to Get ahead

After interviewing more than 2000 executives, E.D. Betaf has identified the following career mistakes-which would come in the way of someone who wants to get ahead.

l Having no plan: Conflict is an inescapable path of organisational life. So if you are in conflictwith someone who could derail your career-think twice before getting into the soup. Insteadwork out the details of a plan that would help you move closer to those who matter in yourworkspot.

l Lacking expectations: People who don’t understand what their employer would expect them todeliver are bound to miss the bus. Always better to read your job description, identify importanttasks to be carried out, seek clarifications from your boss and deliver things in tune with yourboss’s instructions.

l Being a loner: The golden rule of work is relationships, relationships and relationships. Friendlyrelationships help you move closer to your colleagues, make you an important member of a teamand build long-lasting bonds with people in other departments as well. It’s far too risky to be aloner and expect your work to speak for itself. Having allies who speak well of your has an addedbenefit in that it increases your visibility to top management.

l Waffling: Business respects those who are willing to take tough decisions and deliver things-right or wrong. People who continually waffle decisions, however, stand out for the wrongreasons.

l Focusing too Narrowly: Inability to develop and adapt is one of the important reasons for careerfailures at many levels. By making sure you develop a variety of widely applicable skills, you canbetter market yourself to your current employer or, if need be, to a new one.

l Covering up: When you commit a blunder the best thing to do is to own up to it and fix it as soonas possible. Handle it right, and you may even come out ahead of the game.

Source: D.B. Hogarthy, “6 Big career mistakes – and How to avoid them”, Reader’s Digest: Wim@Work,Mumbai, 2001.

11.3.2 Organisational Career Development

The assistance from managers and HR department is equally important in achievingindividual career goals and meeting organisational needs. A variety of tools and activitiesare employed for this purpose (Bernardin, pp. 350-356).

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Human Resource Management i. Self-assessment tools: Here the employees go through a process in which theythink through their life roles, interests, skills and work attitudes and preferences.They identify career goals, develop suitable action plans and point out obstaclesthat come in the way. Two self-assessment tools are quite commonly used inorganisations. The first one is called the career-planning workshop. After individualscomplete their self-assessments, they share their findings with others in careerworkshops. These workshops throw light on how to prepare and follow throughindividual career strategies. The second tool, called a career workbook, consists ofa form of career guide in the question-answer format outlining steps for realisingcareer goals. Individuals use this company specific, tailor-made guide to learn abouttheir career chances. This guide, generally throws light on organisation’s structure,career paths, qualifications for jobs and career ladders.

Box 11.3: Career Self Assessment Instrument

Name ..................................................................................... Age .........................................Department .............................

Part A Values and Experiences

1. Describe the roles in your life that are important to you (work life, family life, religious life,community life etc.). Explain why these roles are important to you. Indicate how these rolesimpact your total life satisfaction. Assign a per cent to each role (0 to 100 per cent) so that thetotal adds upto 100 per cent.

2. Describe your educational background, including the degrees earned, academic strengthsand weaknesses, extra curricular activities etc.

Degrees/Diplomas Academic Strengths Academic Extra curricularWeaknesses Activities

1 1 1 12 2 2 23 3 3 3

3. List any jobs you held and your experience in each position

Occupation Job Degree of What I Linked What I Why Ispecialisation Disliked Left

1.2.3.4.5.

4. Describe any skills (rank 1 to 5 (lowest to highest) that you possess

a. Communication 1 2 3 4 5

b. Leadership 1 2 3 4 5

c. Interpersonal 1 2 3 4 5

d. Team building 1 2 3 4 5

e. Creativity 1 2 3 4 5

f. Technical 1 2 3 4 5

(Tick the most appropriate one)5. Summarise any recognition/awards that you have received in relation to your education,

work experience, skills or extra curricular activities.Part B. Career Goals, Work Attitudes and Preferences1. The most important needs I want to satisfy in my career are

abc

2. These needs can be fulfilled in the following:Areas Skills/Assistance neededa: a:b: b:c: c:

3. How important are these values to you in your work (I most important : 10 least important)

Values Rank

Contd....

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Managing Careers

ii. Individual counselling: Employee counselling is a process whereby employeesare guided in overcoming performance problems. It is usually done through face-to-face meetings between the employee and the counsellor or coach. Here,discussions of employees’ interests, goals, current job activities and performanceand career objectives take place. Counselling is generally offered by the HRdepartment. Sometimes outside experts are also be called in. If supervisors act ascoaches they should be given clearly defined roles and training. This is, however, acostly and time consuming process.

iii. Information services: Employment opportunities at various levels are made knownto employees through information services of various kinds. Records of employees’skills, knowledge, experience and performance indicate the possible candidates forfilling up such vacancies. For compiling and communicating career-relatedinformation to employees, organisations basically use four methods:

l Job posting system: Job posting systems are used by companies to informemployees about vacancies in the organisation through notice boards,newsletters and other company publications.

l Skills inventory: Skills inventories (containing employees’ work histories,qualifications, accomplishments, career objectives, geographical preferences,possible retirement dates, etc.) are created to help organisations learn thecharacteristics of their workforces so that they can use the skills of theiremployees, whenever required. Skills inventories also reveal shortage of criticalskills among employees, which is helpful in tracing training needs.

Part B. Career Goals, Work Attitudes and Preferences1. The most important needs I want to satisfy in my career are

abc

2. These needs can be fulfilled in the following:Areas Skills/Assistance neededa: a:b: b:c: c:

3. How important are these values to you in your work (I most important : 10 least important)

Values Rank

1. Independence or autonomy -2. Financial rewards -3. Sense of achievement -4. Helping others -5. Creating something -6. Job security -7. Good working conditions -8. Friendships at work -9. Variety of tasks -10. Equality and fairness -

4. Whatever job I handle, I do not wish to compromise on the following1: 4:2: 5:3: 6:

5. What internal and external constraints might you encounter along the way towardachievement of your career goals?

6. List the specific jobs that might be in line with the above requirementsabc

7. Finally, rate yourself on each of the following personal qualities or work characteristics.Write one response for each characteristic (using the following scale: 1. very low, 2. low,3. average, 4. high, 5. very high)a. Emotional maturity f. Dependability in completing workb. Initiative/Independence g. Flexibility and open mindednessc. Punctuality h. Perseverance/willingness to workd. Ability to handle conflict I. Ability to set and achieve goalse. Ability to plan, organise

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Human Resource Management l Career ladders and career paths: Career paths and ladders throw light oncareer progression and future job opportunities in the organisation. They indicatea career plan complete with the goal, intermediate steps and time-tables forrealising the goal. Usually career paths for fast-track employees are laiddown in most organisations outlining a series of career moves that theseemployees need to initiate in order to reach higher level positions.

l Career resource centre: The career centre is a sort of library in the organisationestablished to distribute career development materials such as reference books,career manuals, brochures, newsletters and learning guides and self-studytapes.

iv. Employee assessment programmes: Initially, a new recruit is informed aboutcareer policies and procedures of the company. Socialisation efforts help the recruitlearn about these things quickly. An experienced employee, acting as a coach mayalso help the new recruit form a realistic view of the skills needed at various levelsand develop appropriate career goals and action plans. Formal orientationprogrammes are used to educate employees on career programmes, career pathsand opportunities for advancement within the company.

Several assessment programmes are also used to evaluate the employees’ potentialfor growth and development in the organisation. They include assessment centre,psychological testing, promotability forecasts and succession planning.

Box 11.4: Career Development Strategies followed by Indian Companies

At the organisation level, let us examine the career development strategies adopted by three leadingcompanies in India.

Ernst & Young (India)

The global consulting firm uses the same career development methodology in India that it useselsewhere. Primarily, it seeks to align individual aspirations with organisational, business and functionalgoals, using the formal assessment system to check for skill gaps and career potential. While designingtraining tools, things that are given serious attention are past performance, future potential, theindividual skill sets and competencies of each manager, and the need of the company. However, thefirm often takes the assistance of professional trainers brought in from E&Y offices worldwide, orrelevant institutions to design specific training programmes for different categories and levels ofmanagers.

Hyundai Motor (India)

Most executives working for this South Korean car-maker, which started operations in India relativelyrecently, are middle-level recruits from different industries who have been chosen on the basis of theirtrack record—a factor whose influence pervades the company’s career development system. Thecompany aims to convert these managers into ‘achievers’ for Hyundai, with attributes like mentaltoughness, professional competence, and an ambition to advance. The HR department devisesinterventions keeping these goals in mind. The HR functionaries are expected to look at the developmentprocess holistically. The company also conducts a three-day process lab where the system is discussedusing case studies.

Seagram (India)

The Canadian liquor major has a career development system that hinges on speedy induction. Amongthe inputs given during the induction programme, fitting in with the organisational culture is critical.The aim is to enable the new entrant to hit the ground running in terms of performance. Theprogrammes also includes sessions on the history of the organisation, product portfolio, and operations.The programme includes visits to markets and bottling units and sessions with each functional head.

l Assessment centres: A number of performance simulation tests and exercises(tests, interviews, in-baskets, business games) are used to rate a candidate’spotential in assessment centre method. The performance on these exercisesis evaluated by a panel of raters and the candidates are given feedback ontheir strengths and weaknesses. This feedback helps participants to assesswhere they stand and what is to be done to scale the corporate ladder in future.

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Managing Careersl Psychological tests: Diagnostic tests are used to help candidates determinetheir vocational interests, personality types, work attitudes and other personalcharacteristics that may uncover their career needs and preferences.

l Promotability forecasts: This is a process of identifying employees withhigh career potential and giving them necessary training and thereby groomthem for higher positions.

l Succession planning: This is a report card showing which individuals areready to move into higher positions in the company. The HR departmentkeeps records of all potential candidates who could move into senior positions,whenever required.

v. Employee developmental programmes: These consist of skill assessment(explained above) and training efforts that organisations use to groom their employeesfor future vacancies. Seminars, workshops, job rotations and mentoring programmesare used to develop a broad base of skills as a part of such developmental activities.

vi. Career programmes for special groups: In recent years, there is growing evidenceregarding dual career families developing tensions and frictions owing to their inabilityto reconcile the differences between family roles and work demands. When wetalk of dual career couples (a situation where both husband and wife have distinctcareers outside the home) certain puzzling questions arise naturally: Whose careeris important; Who takes care of children; What if the wife gets a tempting promotionin another location; Who buys groceries and cleans the house if both are busy, etc.Realising these problems, organisations are providing a place and a procedure fordiscussing such role conflicts and coping strategies. They are coming out withschemes such as part-time work, long parental leave, child care centres, flexibleworking hours and promotions and transfers in tune with the demands of dualcareer conflicts.

Outplacement assistance is extended to employees who are laid off for variousreasons. In addition to holding workshops, outside experts are called in to showindividuals how to focus on their talents, develop resumes and interview withprospective employers. Special programmes are also organised for minorities,employees with disabilities, women and late-career employees so that they canhave clear career goals and action plans in line with organisational requirements.

11.4 LET US SUM UP

Career planning is the process by which one selects career goals and the path to thesegoals. The major focus of career planning is on assisting the employees achieve a bettermatch between personal goals and the opportunities that are realistically available in theorganisation. Identifying individual needs and aspirations, Analyising career opportunities,Aligning needs and opportunities, Action plans and periodic review.


Explain how you might use a self-assessment tool as part of a career developmentsystem you design for an organisation.

11.6 KEYWORDS

Personal Department

Carrer Planning

Career Progression

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Human Resource Management Career Strategy

Ambitions

Proactive steps

Assistance

Job-posting system

Individual counselling


1. How would you define Career Planning?

2. List out the steps involved in Career Planning.








LESSON

12MANAGING PROMOTIONS AND TRANSFERS

CONTENTS


12.1 Introduction

12.2 Promotions

12.2.1 Purposes and Advantages of Promotion

12.2.2 Bases of Promotion

12.2.3 Promotion Policy

12.3 Transfers

12.3.1 Purposes of Transfer

12.3.2 Types of Transfers

12.3.3 Benefits and Problems

12.3.4 Transfer Policy

12.4 Let us Sum Up


12.6 Keywords




In this lesson we shall discuss about managing promotions and transfers. After goingthrough this lesson you will be able to:

(i) Discuss promotions and its advantages purposes, bases, policy.

(ii) analyse transfer and its benefits, problems, purposes, policy.

12.1 INTRODUCTION

Promotion basically is a reward for efficiency. It is conferment of additional benefits,usually in the form of higher pay, for an increase in responsibility or skill which is formalisedby an increase in status or rank. Yet, in another way, promotion can be defined asadvancement of an employee in an organisation to another job, which commands betterpay/wages, better status/prestige and higher opportunities/challenges and responsibilities,a better working environment, hours of work and facilities etc.

Transfer is the lateral movement of employees from one position, division, departmentor unit to another. Generally transfer does not involve any significant change incompensation, duties responsibilities or even status.

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Human Resource Management 12.2 PROMOTIONS

Promotion refers to upward movement of an employee from current job to another thatis higher in pay, responsibility and/or organisational level. Promotion brings enhancedstatus, better pay, increased responsibilities and better working conditions to the promotee.There can, of course, be ‘dry promotion’ where a person is moved to a higher level jobwithout increase in pay. Promotion is slightly different from upgradation which meanselevating the place of the job in the organisational hierarchy (a better title is given now)or including the job in higher grade (minor enhancement in pay in tune with the limitsimposed within a particular grade). A transfer implies horizontal movement of an employeeto another job at the same level. There is no increase in pay, authority or status. Hence,it cannot act as a motivational tool. Promotion, on the other hand, has in-built motivationalvalue, as it elevates the status and power of an employee within an organisation.

12.2.1 Purposes and Advantages of Promotion

Promotion, based either on meritorious performance or continuous service, has powerfulmotivational value. It forces an employee to use his knowledge, skills and abilities fullyand become eligible for vertical growth. It inspires employees to compete and getahead of others. Those who fall behind in the race are also motivated to acquire therequired skills to be in the reckoning. Promotion thus, paves the way for employee selfdevelopment. It encourages them to remain royal and committed to their jobs and theorganisation. The organisation would also benefit immensely because people are readyto assume challenging roles by improving their skills constantly. Interest in training anddevelopment programmes would improve. The organisation would be able to utilise theskills and abilities of its personnel more effectively.

12.2.2 Bases of Promotion

Organisations adopt different bases of promotion depending upon their nature, size,management, etc. Generally, they may combine two or more bases of promotion. Thewell-established bases of promotion are seniority and merit.

1. Merit-based promotions: Merit based promotions occur when an employee ispromoted because of superior performance in the current job. Merit here denotesan individual's knowledge, skills, abilities and efficiency as measured from hiseducational qualifications, experience, training and past employment record. Theadvantages of this system are fairly obvious :

i. It motivates employees to work hard, improve their knowledge, acquire newskills and contribute to organisational efficiency.

ii. It helps the employer to focus attention on talented people, recognise andreward their meritorious contributions in an appropriate way.

iii. It also inspires other employees to improve their standards of performancethrough active participation in all developmental initiatives undertaken by theemployer (training, executive development, etc.)

However, the system may fail to deliver the results, because:

i. It is not easy to measure merit. Personal prejudices, biases and union pressuresmay come in the way of promoting the best performer.

ii. When young employees get ahead of other senior employees in an organisation(based on superior performance), frustration and discontentment may spreadamong the ranks. They may feel insecure and may even quit the organisation.

iii. Also, past performance may not guarantee future success of an employee.Good performance in one job (as a Foreman, for example) is no guarantee ofgood performance in another (as a supervisor).

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Managing Promotionsand Transfers

2. Seniority-based promotions: Seniority refers to the relative length of service inthe same organisation. Promoting an employee who has the longest length ofservice is often widely welcomed by unions because it is fairly objective. It is easyto measure the length of service and judge the seniority. There is no scope forfavouritism, discrimination and subjective judgement. Everyone is sure of gettingthe same, one day.

In spite of these merits, this system also suffers from certain limitations. They are:

i. The assumption that the employees learn more with length of service is notvalid as employees may learn upto a certain stage, and learning capabilitiesmay diminish beyond a certain age.

ii. It demotivates the young and more competent employees and results in greateremployee turnover.

iii. It kills the zeal and interest to develop, as everybody will be promoted withoutshowing any all-round growth or promise.

iv. Judging the seniority, though it seems to be easy in a theoretical sense, ishighly difficult in practice as the problems like job seniority, company seniority,zonal/regional seniority, service in different organisations, experience asapprentice trainee, trainee, researcher, length of service not only by days butby hours and minutes will crop up.

12.2.3 Promotion Policy

Seniority and merit, thus, suffer from certain limitations. To be fair, therefore, a firm-should institute a promotion policy that gives due weightage to both seniority and merit.To strike a proper balance between the two, a firm could observe the following points:

i. Establish a fair and equitable basis for promotion i.e., merit or seniority or both.

ii. A promotion policy established thus, should provide equal opportunities for promotionin all categories of jobs, departments and regions of an organisation.

iii. It should ensure an open policy in the sense that every eligible employee is consideredfor promotion rather than a closed system which considers only a particular classof employees. It must tell the employees the various avenues for achieving verticalgrowth through career maps, charts etc.

iv. The norms for judging merit, length of service, potentiality, etc., must be establishedbeforehand. The relative weightage to be given to merit or seniority or both shouldalso be spelt out clearly.

v. The mode of acquiring new skills, knowledge, etc., should be specified to allemployees so that they can prepare themselves for career advancement.

vi. Appropriate authority should be entrusted with the responsibility of taking a finaldecision on promotion.

vii. Detailed records of service, performance, etc., should be maintained for allemployees, to avoid charges of favouritism, nepotism etc.

viii. It should be consistent in the sense that it is applied uniformly to all employees,inspective of their background.

ix. Promotion policy should contain alternatives to promotion when deserving candidatesare not promoted due to lack of vacancies at higher level. These alternatives includeupgradation, redesignation, sanctioning of higher pay or increments or allowancesassigning new and varied responsibilities to the employee by enriching the job orenlarging the job.

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Human Resource Management x. A provision for appeal against (alleged) arbitrary actions of management and itsreview should be there.

xi. Promotions initially may be for a trial period so as to minimise the mistakes ofpromotion.

xii. Promotion policy, once it is formulated, should be communicated to all employees,particularly to the trade union leaders. It should be reviewed periodically, based onthe experiences and findings of the attitude and morale surveys.

12.3 TRANSFERS

A transfer is a change in job assignment. It may involve a promotion or demotion or nochange at all in status and responsibility. A transfer has to be viewed as a change inassignment in which an employee moves from one job to another in the same level ofhierarchy, requiring similar skills, involving approximately same level of responsibility,same status and same level of pay. A transfer does not imply any ascending (promotion)or descending (demotion) change in status or responsibility.

12.3.1 Purposes of Transfer

Organisations resort to transfers with a view to serve the following purposes:

i. To meet the organisational requirements: Organisations may have to transferemployees due to changes in technology, changes in volume of production, productionschedule, product line, quality of products, changes in the job pattern caused bychange in organisational structure, fluctuations in the market conditions like demandsfluctuations, introduction of new lines and/or dropping of existing lines. All thesechanges demand the shift in job assignments with a view to place the right man onthe right job.

ii. To satisfy the employee needs: Employees may need transfers in order to satisfytheir desire to work under a friendly superior, in a department/region whereopportunities for advancement are bright, in or near their native place or place ofinterest, doing a job where the work itself is challenging, etc.

iii. To utilise employees better: An employee may be transferred because managementfeels that his skills, experience and job knowledge could be put to better useelsewhere.

iv. To make the employee more versatile: Employees may be rolled over differentjobs to expand their capabilities. Job rotation may prepare the employee for morechallenging assignments in future.

v. To adjust the workforce: Workforce may be transferred from a plant where thereis less work to a plant where there is more work.

vi. To provide relief: Transfers may be made to give relief to employees who areoverburdened or doing hazardous work for long periods.

vii. To reduce conflicts: Where employees find it difficult to get along with colleaguesin a particular section, department or location – they could be shifted to anotherplace to reduce conflicts.

viii. To punish employees: Transfers may be effected as disciplinary measures – toshift employees indulging in undesirable activities to remote, far-flung areas.

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12.3.2 Types of Transfers

Transfers can be classified thus:

i. Production transfers : Transfers caused due to changes in production.

ii. Replacement transfers: Transfers caused due to replacement of an employeeworking on the same job for a long time.

iii. Rotation transfers : Transfers initiated to increase the versatility ofemployees.

iv. Shift transfers : Transfers of an employee from one shift to another.

v. Remedial transfers : Transfers initiated to correct the wrong placements.

vi. Penal transfers : Transfers initiated as a punishment for indisciplinaryaction of employees.

12.3.3 Benefits and Problems

A summary of benefits and problems associated with transfers is given below:

Benefits Problemsl Improve employee skills l Inconvenient to employees who

otherwise do not want to movel Reduce monotony, boredom l Employees may or may not fit in

the new location/departmentl Remedy faulty placement decisionsl Shifting of experienced hands

may affect productivityl Prepare the employee for l Discriminatory transfers may

challenging assignments in future affect employee morale.

l Stabilise changing work requirementsin different departments/locations

l Improve employee satisfaction and morale

l Improve employer-employee relations

Transfers have to be carried out in a systematic way, with a view to avoid allegations ofdiscrimination and favouritism. Some of the above cited problems associated with transferscould be avoided, if organisations formulate a definite transfer policy, for use at differentpoints of time.

12.3.4 Transfer Policy

Organisations should clearly specify their policy regarding transfers. Otherwise, superiorsmay transfer their subordinates arbitrarily if they do not like them. It causes frustrationamong employees. Similarly, subordinates may also request for transfers even for thepetty issues. Most of the people may ask for transfer to riskless and easy jobs andplaces. As such, organisation may find it difficult to manage such transfers. Hence, anorganisation should formulate a systematic transfer policy. A systematic transfer policyshould contain the following items:

i. Specification of circumstances under which an employee will be transferred in thecase of any company initiated transfer.

ii. Name of the superior who is authorised and responsible to initiate a transfer.

iii. Jobs from and to which transfers will be made, based on the job specification,description and classification, etc.

iv. The region or unit of the organisation within which transfers will be administered.

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Human Resource Management v. Reasons which will be considered for personal transfers, their order of priority, etc.

vi. Reasons for mutual transfer of employees.

vii. Norms to decide priority when two or more employees request for transfers likepriority of reason, seniority.

viii. Specification of basis for transfer, like job analysis, merit, length of service.

ix. Specification of pay, allowances, benefits, etc., that are to be allowed to the employeein the new job.

x. Other facilities to be extended to the transferee like special level during the periodof transfer, special allowance for packaging luggage, transportation, etc.

Generally, line managers administer the transfers and HR managers assist the linemanagers in this respect.

Check your Progress


(a) Human Resource Planning is the process of analysing and estimating the needfor and availability of .........................

(b) Career progress rests largely on ..........................

(c) A ......................... is an older person in a managerial role offering informal adviceto a junior employee.

(d) ......................... is a process whereby employees are guided in overcomingperformance problems.

(e) ......................... refers to upward movement of an employee from current job toanother that is higher in pay, responsibility and organisational level.

12.4 LET US SUM UP

Promotion refers to upward movement of an employee from current job to another thatis higher in pay, responsibility and/or organisational level. Promotion brings enhancedstatus, better pay, increased responsibilities and better working conditions to the promotee.A transfer is a change in job assignment. It may involve a promotion or demotion or nochange at all in status and responsibility. A transfer has to be viewed as a change inassignment in which an employee moves from one job to another in the same level ofhierarchy, requiring similar skills, involving approximately same level of responsibility,same status and same level of pay.


What are the benefits and problems associated with transfer? How can you maximisethe benefits and minimise the problems?

12.6 KEYWORDS

Self Assessment tools

Individual Counselling

Skill Invention

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Promotions

Transfers


1. What are the basics of Promotion?

2. Define Transfer.

3. What are the types of Transfer?








Unit-IV

LESSON

13ESTABLISHING PAY PLANS

CONTENTS


13.1 Introduction

13.2 Basic of Compensation

13.2.1 Nature of Compensation

13.2.2 Objectives of Compensation Planning

13.3 Factors Determining Pay Rate

13.4 Current Trends in Compensation

13.4.1 Wages

13.4.2 Basic Wage

13.4.3 Dearness Allowance (DA)

13.5 Job Evaluation

13.5.1 Job Evaluation vs. Performance Appraisal

13.5.2 Features

13.5.3 Process of Job Evaluation

13.5.4 Essentials for the Success of a Job Evaluation Programme

13.5.5 Benefits

13.6 Job Evaluation Methods

13.6.1 Ranking Method

13.6.2 Classification Method

13.6.3 Factor Comparison Method

13.6.4 Point Method

13.6.5 Merits and Demerits

13.7 Pricing Managerial and Professional Job

13.7.1 Indian Practices

13.8 Computerised Job Evaluation

13.9 Let us Sum Up


13.11Keywords



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Human Resource Management 13.0 AIMS AND OBJECTIVES

In this lesson we shall discuss about establishing pay plans. After going through thislesson you will be able to:

(i) Understand basic of compensation and factors determining pay rate.

(ii) Discuss current trends in compensation and job evaluation and its methods.

(iii) Analyse pricing job and computerised job evaluation.

13.1 INTRODUCTION

Job evaluation is the systematic process of determining the relative worth of jobs inorder to establish which jobs should be paid more than others within the organisation. Jobevaluation helps to establish internal equity between various jobs. Compensationadministration intends to develop the lowest-cost pay structure that will not only attract,inspire and motivate capable employees but also be perceived as fair by these employees.

13.2 BASIC OF COMPENSATION

Compensation is what employees receive in exchange for their contribution to theorganisation. Generally, employees offer their services for three types of rewards. Payrefers to the base wages and salaries employees normally receive. Compensation formssuch as bonuses, commissions and profit sharing plans are incentives designed toencourage employees to produce results beyond normal expectation. Benefits such asinsurance, medical, recreational, retirement, etc., represent a more indirect type ofcompensation. So, the term compensation is a comprehensive one including pay, incentives,and benefits offered by employers for hiring the services of employees. In addition tothese, managers have to observe legal formalities that offer physical as well as financialsecurity to employees. All these issues play an important role in any HR department’sefforts to obtain, maintain and retain an effective work force.

13.2.1 Nature of Compensation

Compensation offered by an organisation can come both directly through base pay andvariable pay and indirectly through benefits.

i. Base pay: It is the basic compensation an employee gets, usually as a wage orsalary.

ii. Variable pay: It is the compensation that is linked directly to performanceaccomplishments (bonuses, incentives, stock options)

iii. Benefits: These are indirect rewards given to an employee or group of employeesas a part of organisational membership (health insurance, vacation pay, retirementpension etc.)

13.2.2 Objectives of Compensation Planning

The most important objective of any pay system is fairness or equity. The term equityhas three dimensions.

i. Internal equity: This ensures that more difficult jobs are paid more.

ii. External equity: This ensures that jobs are fairly compensated in comparison tosimilar jobs in the labour market.

iii. Individual equity: It ensures equal pay for equal work, i.e., each individual’s payis fair in comparison to others doing the same/similar jobs.

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Establishing Pay PlansIn addition, there are other objectives also. The ultimate goal of compensationadministration (the process of managing a company’s compensation programme) is toreward desired behaviours and encourage people to do well in their jobs. Some of theimportant objectives that are sought to be achieved through effective compensationmanagement are listed below:

a. Attract talent: Compensation needs to be high enough to attract talented people.Since many firms compete to hire the services of competent people, the salariesoffered must be high enough to motivate them to apply.

b. Retain talent: If compensation levels fall below the expectations of employees orare not competitive, employees may quit in frustration.

c. Ensure equity: Pay should equal the worth of a job. Similar jobs should get similarpay. Likewise, more qualified people should get better wages.

d. New and desired behaviour: Pay should reward loyalty, commitment, experience,risks taking, initiative and other desired behaviours. Where the company fails toreward such behaviours, employees may go in search of greener pastures outside.

e. Control costs: The cost of hiring people should not be too high. Effectivecompensation management ensures that workers are neither overpaid nor underpaid.

f. Comply with legal rules: Compensation programmes must invariably satisfygovernmental rules regarding minimum wages, bonus, allowances, benefits, etc.

g. Ease of operation: The compensation management system should be easy tounderstand and operate. Then only will it promote understanding regarding pay-related matters between employees, unions and managers.

13.3 FACTORS DETERMINING PAY RATE

The amount of compensation received by an employee should reflect the effort put in bythe employee, the degree of difficulty experienced while expending his energies, thecompetitive rates offered by others in the industry and the demand-supply position withinthe country, etc. These are discussed below.

i. Job needs: Jobs vary greatly in their difficulty, complexity and challenge. Someneed high levels of skills and knowledge while others can be handled by almostanyone. Simple, routine tasks that can be done by many people with minimal skillsreceive relatively low pay. On the other hand, complex, challenging tasks that canbe done by few people with high skill levels generally receive high pay.

ii. Ability to pay: Projects determine the paying capacity of a firm. High profit levelsenable companies to pay higher wages. This partly explains why computer softwareindustry pays better salaries than commodity based industries (steel, cement,aluminium, etc.). Likewise, multinational companies also pay relatively high salariesdue to their earning power.

iii. Cost of living: Inflation reduces the purchasing power of employees. To overcomethis, unions and workers prefer to link wages to the cost of living index. When theindex rises due to rising prices, wages follow suit.

iv. Prevailing wage rates: Prevailing wage rates in competing firms within an industryare taken into account while fixing wages. A company that does not pay comparablewages may find it difficult to attract and retain talent.

v. Unions: Highly unionised sectors generally have higher wages because wellorganised unions can exert presence on management and obtain all sorts of benefitsand concessions to workers.

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Human Resource Management vi. Productivity: This is the current trend in most private sector companies whenworkers’ wages are linked to their productivity levels. If your job performance isgood, you get good wages. A sick bank, for example, can’t hope to pay competitivewages, in tune with profit making banks.

vii. State regulation: The legal stipulations in respect of minimum wages, bonus,dearness allowance, allowances, etc., determine the wage structure in an industry.

viii. Demand and supply of labour: The demand for and the supply of certain skillsdetermine prevailing wage rates. High demand for software professionals, R&Dprofessionals in drug industry, telecom and electronics engineers, financial analysts,management consultants ensures higher wages. Oversupply kills demand for acertain category of employees leading to a steep fall in their wages as well.

13.4 CURRENT TRENDS IN COMPENSATION

The pay structure of a company depends on several factors such as labour marketconditions, company’s paying capacity and legal provisions:

13.4.1 Wages

In India, different Acts include different items under wages, though all the Acts includebasic wage and dearness allowance under the term wages. Under the Workmen’sCompensation Act, 1923, “wages for leave period, holiday pay, overtime pay, bonus,attendance bonus, and good conduct bonus” form part of wages.

Under The Payment of Wages Act, 1936, Section 2 (vi), “any award of settlement andproduction bonus, if paid, constitutes wages.”

Under the Payment of Wages Act, 1948, “retrenchment compensation, payment in lieuof notice and gratuity payable on discharge constitute wages.”

However, the following types of remuneration, if paid, do not amount to wages underany of the Acts:

i. Bonus or other payments under a profit-sharing scheme which do not form a partof contract of employment.

ii. Value of any house accommodation, supply of light, water, medical attendance,travelling allowance, or payment in lieu thereof or any other concession.

iii. Any sum paid to defray special expenses entailed by the nature of the employmentof a workman.

iv. Any contribution to pension, provident fund, or a scheme of social security andsocial insurance benefits.

v. Any other amenity or service excluded from the computation of wages by generalor special order of an appropriate governmental authority.

The term ‘Allowances’ includes amounts paid in addition to wages over a period of timeincluding holiday pay, overtime pay, bonus, social security benefit, etc. The wage structurein India may be examined broadly under the following heads:

13.4.2 Basic Wage

The basic wage in India corresponds with what has been recommended by the FairWages Committee (1948) and the 15th Indian Labour Conference (1957). The variousawards by wage tribunals, wage boards, pay commission reports and job evaluationsalso serve as guiding principles in determining ‘basic wage’. While deciding the basicwage, the following criteria may be considered: (i) Skill needs of the job; (ii) Experienceneeded; (iii) Difficulty of work: mental as well as physical; (iv) Training needed;(v) Responsibilities involved; (vi) Hazardous nature of job.

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Establishing Pay Plans13.4.3 Dearness Allowance (DA)

It is the allowance paid to employees in order to enable them to face the increasingdearness of essential commodities. It serves as a cushion, a sort of insurance againstincrease in price levels of commodities. Instead of increasing wages every time there isa rise in price levels, DA is paid to neutralise the effects of inflation; when prices godown, DA can always be reduced. This has, however, remained a hypothetical situationas prices never come down to necessitate a cut in dearness allowance payable toemployees.

DA is linked in India to three factors: the index factor, the time factor and the point factor.

i. All India consumer price index (AICPI): The Labour Bureau, Shimla, computesthe AICPI (Base 1960 = 100 points) from time to time.

ii. Time factor: In this case DA is linked to the rise in the All India Consumer PriceIndex (AICPI) in a related period, instead of linking it to fortnightly or monthlyfluctuations in index.

iii. Point factor: Here DA rises in line with a rise in the number of index points abovea specific level.

iv. Other allowances: The list of allowances granted by employers in India has beenexpanding, thanks to the increasing competition in the job market and the growingawareness on the part of employees. An illustrative list of allowances is furnishedin Box 13.1 below:

Box 13.1: List of Allowances in the Organised Sector in India

13.5 JOB EVALUATION

Job evaluation is a systematic way of determining the value/worth of a job in relation toother jobs in an organisation. It tries to make a systematic comparison between jobs toassess their relative worth for the purpose of establishing a rational pay structure.

Job evaluation needs to be differentiated from job analysis. Job analysis is a systematicway of gathering information about a job. Every job evaluation method requires at leastsome basic job analysis in order to provide factual information about the jobs concerned.Thus, job evaluation begins with job analysis and ends at that point where the worth of ajob is ascertained for achieving pay-equity between jobs.

l Attendance l Night shift l Tiffin

l Books l Overtime l Transport

l Car l Paternity l Telephone

l Card (Credit card) l Pension l Uniform

l City Compensatory l Provident Fund

l Club Membership l Relocation

l Computer l Servant

l Deputation

l Driver

l Education

l ESIS

l Family

l Group Insurance

l Leave Travel

l Lunch

l Medical

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Human Resource Management 13.5.1 Job Evaluation vs Performance Appraisal

Job evaluation is different from performance appraisal. PA is the systematic descriptionof an employee’s job-related strengths and weaknesses. The basic purpose of PA is tofind out how well the employee is doing the job and establish a plan for improvement.The aim of job evaluation is to find the relative value/worth of a job and determine whata fair wage for such a job should be. The differences between the two may be presentedthus:

Box 13.2: Job Evaluation vs Performance Appraisal

13.5.2 Features

The purpose of job evaluation is to produce a defensive ranking of jobs on which arational and acceptable pay structure can be built. The important features of job evaluationmay be summarised thus:

i. It tries to assess jobs, not people.

ii. The standards of job evaluation are relative, not absolute.

iii. The basic information on which job evaluations are made is obtained from jobanalysis.

iv. Job evaluations are carried out by groups, not by individuals.

v. Some degree of subjectivity is always present in job evaluation.

vi. Job evaluation does not fix pay scales, but merely provides a basis for evaluating arational wage structure.

13.5.3 Process of Job Evaluation

The process of job evaluation involves the following steps:

i. Gaining acceptance: Before undertaking job evaluation, top management mustexplain the aims and uses of the programme to the employees and unions. Toelaborate the programme further, oral presentations could be made. Letters, bookletscould be used to classify all relevant aspects of the job evaluation programme.

ii. Creating job evaluation committee: It is not possible for a single person to evaluateall the key jobs in an organisation. Usually a job evaluation committee consisting ofexperienced employees, union representatives and HR experts is created to set theball rolling.

iii. Finding the jobs to be evaluated: Every job need not be evaluated. This may betoo taxing and costly. Certain key jobs in each department may be identified. Whilepicking up the jobs, care must be taken to ensure that they represent the type ofwork performed in that department.

iv. Analysing and preparing job description: This requires the preparation of a jobdescription and also an analysis of job needs for successful performance .

v. Selecting the method of evaluation: The most important method of evaluatingthe jobs must be identified now, keeping the job factors as well as organisationaldemands in mind.

Point Job Evaluation Performance Appraisal

Define Find the relative worth of a job. Find the worth of a job holder.

Aim Determine wage rates for different Determine incentives and rewardsjobs. for superior performance.

Shows How much a job is worth. How well an individual is doing anassigned work.

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Establishing Pay Plansvi. Classifying jobs: The relative worth of various jobs in an organisation may befound out after arranging jobs in order of importance using criteria such as skillrequirements, experience needed, under which conditions job is performed, type ofresponsibilities to be shouldered, degree of supervision needed, the amount of stresscaused by the job, etc. Weights can be assigned to each such factor. When wefinally add all the weights, the worth of a job is determined. The points may then beconverted into monetary values.

vii. Installing the programme: Once the evaluation process is over and a plan of actionis ready, management must explain it to employees and put it into operation.

viii. Reviewing periodically: In the light of changes in environmental conditions(technology, products, services, etc.) jobs need to be examined closely. For example,the traditional clerical functions have undergone a rapid change in sectors likebanking, insurance and railways, after computerisation. New job descriptions needto be written and the skill needs of new jobs need to be duly incorporated in theevaluation process. Otherwise, employees may feel that all the relevant job factors– based on which their pay has been determined – have not been evaluated properly.

13.5.4 Essentials for the Success of a Job Evaluation Programme

Following are the essentials for the success of a job evaluation programme:

1. Compensable factors should represent all of the major aspects of job content.Compensable factors selected should (a) avoid excessive overlapping or duplication;(b) be definable and measurable; (c) be easily understood by employees andadministrators; (d) not cause excessive installation or administrative cost; and (e)be selected with legal considerations in mind.

2. Operating managers should be convinced about the techniques and programme ofjob evaluation. They should also be trained in fixing and revising the wages basedon job evaluation.

3. All the employees should be provided with complete information about job evaluationtechniques and programme.

4. All groups and grades of employees should be covered by the job evaluationprogramme.

5. The programme of – and techniques selected for – job evaluation should be easy tounderstand by all the employees.

6. Trade unions acceptance and support to the programme should be obtained.

Experts have advanced certain guidelines for conducting the job evaluation programmein a systematic way:

1. Rate the job – not the person or employee on the job.

2. Strive to collect all the facts accurately.

3. Look especially for distinguishing features of jobs and for relationships to otherjobs.

4. Study jobs independently and objectively, and then discuss views thoroughly andopen-mindedly before reaching final decisions.

5. Job evaluation must be conducted systematically, based on factual and accurateinformation.

6. The results of job evaluation must be fair and rational and unbiased to the individualsbeing affected.

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Human Resource Management 13.5.5 Benefits

The pay offs from job evaluation may be stated thus:

i. It tries to link pay with the requirements of the job.

ii. It offers a systematic procedure for determining the relative worth of jobs. Jobsare ranked on the basis of rational criteria such as skill, education, experience,responsibilities, hazards, etc., and are priced accordingly.

iii. An equitable wage structure is a natural outcome of job evaluation. An unbiasedjob evaluation tends to eliminate salary inequities by placing jobs having similarrequirements in the same salary range.

iv. Employees as well as unions participate as members of job evaluation committeewhile determining rate grades for different jobs. This helps in solving wage relatedgrievances quickly.

v. Job evaluation, when conducted properly and with care, helps in the evaluation ofnew jobs.

vi. It points out possibilities of more appropriate use of the plant’s labour force byindicating jobs that need more or less skilled workers than those who are manningthese jobs currently.

13.6 JOB EVALUATION METHODS

There are three basic methods of job evaluation: (1) ranking, (2) classification, (3) factorcomparison. While many variations of these methods exist in practice, the three basicapproaches are described here.

13.6.1 Ranking Method

Perhaps the simplest method of job evaluation is the ranking method. According to thismethod, jobs are arranged from highest to lowest, in order of their value or merit to theorganisation. Jobs can also be arranged according to the relative difficulty in performingthem. The jobs are examined as a whole rather than on the basis of important factors inthe job; the job at the top of the list has the highest value and obviously the job at thebottom of the list will have the lowest value.

Jobs are usually ranked in each department and then the department rankings are combinedto develop an organisational ranking. The following table is a hypothetical illustration ofranking of jobs.

Box 13.3: Array of Jobs according to the Ranking Method

The variation in payment of salaries depends on the variation of the nature of the jobperformed by the employees. The ranking method is simple to understand and practiceand it is best suited for a small organisation. Its simplicity however works to its disadvantagein big organisations because rankings are difficult to develop in a large, complexorganisation. Moreover, this kind of ranking is highly subjective in nature and may offendmany employees. Therefore, a more scientific and fruitful way of job evaluation is calledfor.

Rank Monthly salaries

1. Accountant Rs 30002. Accounts clerk Rs 18003. Purchase assistant Rs 17004. Machine-operator Rs 14005. Typist Rs 9006. Office boy Rs 600

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Establishing Pay Plans13.6.2 Classification Method

According to this method, a predetermined number of job groups or job classes areestablished and jobs are assigned to these classifications. This method places groups ofjobs into job classes or job grades. Separate classes may include office, clerical, managerial,personnel, etc. Following is a brief description of such a classification in an office.

i. Class I - Executives: Further classification under this category may be OfficeManager, Deputy office manager, Office superintendent, Departmental supervisor,etc.

ii. Class II - Skilled workers: Under this category may come the Purchasing assistant,Cashier, Receipts clerk, etc.

iii. Class III - Semiskilled workers: Under this category may come Stenotypists,Machine-operators, Switchboard operator etc.

iv. Class IV - Semiskilled workers: This category comprises Draftaris, File clerks,Office boys, etc.

The job classification method is less subjective when compared to the earlier rankingmethod. The system is very easy to understand and acceptable to almost allemployees without hesitation. One strong point in favour of the method is that ittakes into account all the factors that a job comprises. This system can be effectivelyused for a variety of jobs.

The weaknesses of the job classification method are:

l Even when the requirements of different jobs differ, they may be combinedinto a single category, depending on the status a job carries.

l It is difficult to write all-inclusive descriptions of a grade.

l The method oversimplifies sharp differences between different jobs anddifferent grades.

l When individual job descriptions and grade descriptions do not match well,the evaluators have the tendency to classify the job using their subjectivejudgements.

13.6.3 Factor Comparison Method

A more systematic and scientific method of job evaluation is the factor comparisonmethod. Though it is the most complex method of all, it is consistent and appreciable.Under this method, instead of ranking complete jobs, each job is ranked according to aseries of factors. These factors include mental effort, physical effort, skill needed,responsibility, supervisory responsibility, working conditions and other such factors (forinstance, know-how, problem solving abilities, accountability, etc.). Pay will be assignedin this method by comparing the weights of the factors required for each job, i.e., thepresent wages paid for key jobs may be divided among the factors weighted by importance(the most important factor, for instance, mental effort, receives the highest weight). Inother words, wages are assigned to the job in comparison to its ranking on each jobfactor.

The steps involved in factor comparison method may be briefly stated thus:

i. Select key jobs (say 15 to 20), representing wage/salary levels across theorganisation. The selected jobs must represent as many departments as possible.

ii. Find the factors in terms of which the jobs are evaluated (such as skill, mentaleffort, responsibility, physical effort, working conditions, etc.).

iii. Rank the selected jobs under each factor (by each and every member of the jobevaluation committee) independently.

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Human Resource Management iv. Assign money value to each factor and determine the wage rates for each key job.

v. The wage rate for a job is apportioned along the identified factors.

vi. All other jobs are compared with the list of key jobs and wage rates are determined.

An example of how the factor comparison method works is given below:

Box 13.4: An Example of Factor Comparison Method

After the wage rate for a job is distributed along the identified and ranked factors, allother jobs in the department are compared in terms of each factor. Suppose the job of a‘painter’ is found to be similar to electrician in skill (15), fitter in mental effort (10),welder in physical effort (12) cleaner in responsibility (6) and labourer in working conditions(4). The wage rate for this job would be (15+10+12+6+4) is 47.

Box 13.5: Merits and Demerits of Factor Comparison Method

13.6.4 Point Method

This method is widely used currently. Here, jobs are expressed in terms of key factors.Points are assigned to each factor after prioritising each factor in order of importance.The points are summed up to determine the wage rate for the job. Jobs with similar pointtotals are placed in similar pay grades. The procedure involved may be explained thus:

i. Select key jobs. Identify the factors common to all the identified jobs such as skill,effort, responsibility, etc.

ii. Divide each major factor into a number of sub factors. Each sub factor is definedand expressed clearly in the order of importance, preferably along a scale.

The most frequent factors employed in point systems are (i) Skill (key factor);Education and training required, Breadth/depth of experience required, Social skillsrequired, Problem-solving skills, Degree of discretion/use of judgement, Creativethinking (ii) Responsibility/Accountability: Breadth of responsibility, Specialisedresponsibility, Complexity of the work, Degree of freedom to act, Number andnature of subordinate staff, Extent of accountability for equipment/plant, Extent ofaccountability for product/materials; (iii) Effort: Mental demands of a job, Physicaldemands of a job, Degree of potential stress

Factors Daily Physical Factors Skill Responsibility WorkingKey Wage effort mental conditionsJob Rate effort

Electrician 60 11(3) 14(1) 15(1) 12(1) 8(2)

Fitter 50 14(1) 10(2) 9(2) 8(2) 9(1)

Welder 40 12(2) 7(3) 8(3) 7(3) 6(3)

Cleaner 30 9(4) 6(4) 4(5) 6(4) 5(4)

Labourer 25 8(5) 4(5) 6(4) 3(5) 4(5)

Merits

l Analytical and objective.

l Relative and valid as each job is comparedjobs with all other jobs in terms of key factors.

l Money values are assigned in a fair waybased on an agreed rank order fixed bythe job evaluation committee.

l Flexible, as there is no upper limitation on the ratingof a factor.

Demerits

l Difficult to understand, explain and operate.

l Its use of the same criteria to assess all jobsis questionable as jobs differ across andwithin organisations.

l Time consuming and costly.

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Establishing Pay PlansThe educational requirements (sub factor) under the skill (key factor) may beexpressed thus in the order of importance.

Box 13.6

Degree Define

1 Able to carry out simple calculations; High School educated

2 Does all the clerical operations; computer literate; graduate

3 Handles mail, develops contacts, takes initiative and does work independently; postgraduate

Assign point values to degrees after fixing a relative value for each key factor.

Box 13.7: Point Values to Factors along a Scale

iii. Find the maximum number of points assigned to each job (after adding up the pointvalues of all sub-factors of such a job). This would help in finding the relative worthof a job. For instance, the maximum points assigned to an officer’s job in a bankcome to 540. The manager’s job, after adding up key factors + sub factors points,may be getting a point value of say 650 from the job evaluation committee. This jobis now priced at a higher level.

iv. Once the worth of a job in terms of total points is expressed, the points are convertedinto money values keeping in view the hourly/daily wage rates. A wage survey isusually undertaken to collect wage rates of certain key jobs in the organisation.Let’s explain this:

Box 13.8: Conversion of Job Grade Points into Money Value

13.6.5 Merits and Demerits

The point method is a superior and widely used method of evaluating jobs. It forcesraters to look into all key factors and sub-factors of a job. Point values are assigned to allfactors in a systematic way, eliminating bias at every stage. It is reliable because ratersusing similar criteria would get more or less similar answers. The methodology underlyingthe approach contributes to a minimum of rating error (Robbins p.361). It accounts fordifferences in wage rates for various jobs on the strength of job factors. Jobs maychange over time, but the rating scales established under the point method remainunaffected.

Point range Daily Wage rate (Rs) Job grades of key bank officials

500-600 300-400 1 Officer

600-700 400-500 2 Accountant

700-800 500-600 3 Manager I Scale

800-900 600-700 4 Manager II Scale

900-1000 700-800 5 Manager III Scale

Point values for Degrees T otal

Factor 1 2 3 4 5

Skill 10 20 30 40 50 150

Physical effort 8 16 24 32 40 120

Mental effort 5 10 15 20 25 75

Responsibility 7 14 21 28 35 105

Working conditions 6 12 18 24 30 90

Maximum total points of all factors depending on their importance to job = 540

(Bank Officer)

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Human Resource Management On the negative side, the point method is complex. Preparing a manual for various jobs,fixing values for key and sub-factors, establishing wage rates for different grades, etc.,is a time consuming process. According to Decenzo and Robbins, “the key criteria mustbe carefully and clearly identified, degrees of factors have to be agreed upon in termsthat mean the same to all rates, the weight of each criterion has to be established andpoint values must be assigned to degrees”. This may be too taxing, especially whileevaluating managerial jobs where the nature of work (varied, complex, novel) is suchthat it cannot be expressed in quantifiable numbers.

A comparative picture of various job evaluation methods is presented on Box 13.9.

Box 13.9: Major Job Evaluation Methods

13.7 PRICING MANAGERIAL AND PROFESSIONAL JOB

Organisations decide executive compensation packages, consisting of basic pay,allowances, perquisites, stock options, etc., based on a number of factors. The UnitedStates Compensation institutes’ Phoenix plan uses 28 compensable factors:

Box 13.10: Phoenix Plan-Compensable Factors

l Job related experience l Time spent in planningl Training time required l Contact with suppliers/customersl Frequency of review of work l Impact on departmental budgetl Utilisation of independent choice l Directing of others.l Frequency of reference to guidelines l Training of staff/physical stress

experiencedl Frequency of work transferred through l Time spent working under deadlines

supervisorl Analytical complexity l Time spent in hazardous conditionsl Time spent in processing informationl Supervisors reporting to position levell Travel outside work locationl Salary grade to which this position reportsl Salary grade of positions supervisedl Management responsibilityl Revenue sizel Asset sizel Employment sizel Budget sizel Payroll size

Method What facet of How is job Type of Major Major

job is evaluated? evaluated? method advantages(s) disadvantage(s)

Ranking Whole job Jobs are subjectively Non-quantitative Relatively quick Entirely subjective

(compensable ordered according and in expensive

factors are to relative worth

implicit)

Class Whole job Compare job to Non-quantitative Readily available Cumbersome

-ification descriptions of job and inexpensive system

grades

Factor Compensable Compare job to key Quantitative Easy to use Hard to construct;

comparison factors of job jobs on scales of inaccurate over time

compensable factors

Point Compensable Compare job to Quantitative Accurate and May be costly

method factors of job standardised stable overtime

descriptions of

degrees of universal

compensable factors

and subfactors

165

Establishing Pay PlansThe Hay Group, another specialised US Agency, uses three compensable factors:accountability, problem-solving and know-how. Sibson and company determines basecompensation depending on the market value of the job, its relationship to other positionsin the organisation and the person’s value to the organisation based on long-termperformance and experience. The Compensation Survey Report of Business InternationalAsia – Pacific Limited, Hongkong considered the following factors to determine executivecompensation: education, experience, scope of activities, need to negotiate, type ofproblems handled, decision making authority, influence on results, size of the unit managed,number of people supervised, number of reporting steps to the head of unit.

13.7.1 Indian Practices

Executive compensation in India is basically built around three important factors: jobcomplexity, employers’ ability to pay and executive human capital. The complexity of achief executive’s job would depend on the size of the company as measured by its salesvolume, earnings and assets’ growth, the geographic dispersal of the unit, etc. Theemployer’s ability to pay is also a major factor to be considered while deciding executivecompensation. A sick bank, for instance, cannot afford to pay the same kind of salary toits executives as that of a healthy and growing bank. This partly explains why executivecompensation in public sector undertakings is less when compared to private sectorunits.

Box 13.11: Executive Compensation: Private Sector vs. Public Sector

In a well publicised front page news sometime back The Economic Times mentioned about themiserable salary levels of top executives in public sector units in India. For example the State Bank ofIndia chief is paid 10% of HDFC Bank Managing Director, BHEL's chief getting about Rs.10 to 12lakhs per year as against ABB's MD getting nearly Rs.40 to 50 lakhs; Indian Oil Corporation's chiefgetting Rs.10 to 15 lakhs per annum as against Reliance Industries' Ambanis getting a package of overRs.10 crore per annum. Salary levels in 'hot' private sector such as BPO, hospitality, biotechnology'Media', IT, Telecommunications, Oil, Automobiles and Insurance are way above the packages offeredto executives in public sector for various reasons such as: overstaffing, inefficient processes, pressureon margins due to competition, appointment of people without requisite skills at the top level,political interference especially in pricing the products or services, legal constraints etc.

The economic theory of human capital says that the compensation of a worker should beequal to his marginal productivity. The productivity of an executive, likewise depends onhis qualifications, job knowledge, experience and contribution. Indian companies usuallystructured executive compensation along the following factors: salary, bonus, commission,PF, family pension, superannuation fund, medical reimbursement, leave travel assistance,house rent allowance and other perquisites. In recent years, instead of increasing thebase compensation, companies have been enhancing the worth of an executive job throughnovel payment plans based on earnings/assets or sales growth of the company over aperiod of time, well-supported by an ever-expanding list of allowances and perquisitesincluding stock options, educational, recreational, academic allowances and several otherdevelopmental initiatives aimed at improving the overall personality of an executive.

13.8 COMPUTERISED JOB EVALUATION

The computerization of job evaluation is evolving into an effective way of supporting theambitions of global organizations, largely due to the potential of networkbased jobevaluation tools. They fall into two broad areas:

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Human Resource Management 1. Administrative support, and

2. Evaluation decision support.

Administrative support is about managing the data with the usual array of reporting

facilities.

Evaluation decision support provides guidance to the evaluator in various degrees with

the aim of improving objectivity and consistency. Often built around a questionnaire that

aids the analysis of a job using cross-comparisons and 'sense-checks', computerization

supports a slotting process, improving speed, efficiency and the recording of 'evidence'.

More sophisticated questionnaire approaches emulate the evaluation process through

intelligent 'rules' that generate a computer decision. The 'rules' are, by definition, more

precise, give a consistent result for a given set of inputs and can compute a range of job

content features much faster.

There is now more choice than ever in implementing job evaluation, as follows:

i. Manual systems,

ii. Systems supported by stand-alone computers,

iii. Local networked systems on a common restricted database,

iv. Intranet/Internet-based systems that permit clear control from a central point but

allow significant involvement, and

v. Intranet/Internet-based systems that permit job evaluation decisions to be devolved

to line management.

Smaller organizations are likely to keep manual systems (including some spreadsheet

tools) but may adopt more sophisticated computerized methods while keeping close central

control. Larger organizations are likely to want to spread the management task beyond

the centre and will wish to consider how the job evaluation process integrates with the

mainstream HR information systems. Clearly, it is highly desirable to have common

platforms, although the nature of job evaluation does not require a 'real-time' system.

A comprehensive system that incorporates a variety of job tools and processes - from a

manual scheme to a computerized questionnaire and slotting process - is illustrated below

in Figure 4. Assuming a single analytical job evaluation method, a particular job can be

evaluated using a number of possible paths to arrive at a job evaluation score that is

universally compatible with any of the processes. Figure 4 shows a manual process and

a computerized administration option. In addition, it shows that a computerized analysis

using a questionnaire might be employed to produce a job evaluation score and to enable

easy comparison with a set of reference jobs. These first two computer-supported

processes are analytical job evaluation methods. Finally, a rapid slotting process might be

used to cross-compare with the set of reference jobs and, as a result of the linkage to

one of these, suggest a job evaluation score. The common database of evaluation scores

permits the management of comparisons to a set of reference jobs, which may be a

combination of specifically targeted jobs or standard (generic) jobs. Reporting facilities

will enable production of detailed standard and user-designed reports.

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Establishing Pay Plans

Figure 13.1

Check Your Progress


(a) Suspension (i) Equal pay for equal work

(b) Benefits (ii) Wages, DA

(c) Individual (iii) Systematic way of determining thevalue of a job.

(d) Factors affecting pay (iv) Employee receive in return of his/herstructures contribution to organisaiton.

(e) Job evaluation (v) Insurance, medical, recreational,retirement

2. Differentiate between Job evaluation and performance appraisal.

3. List down the essentials of a successful job evaluation programme.

13.9 LET US SUM UP

Compensation is what employees receive in exchange for their contribution to theorganisation. Pay refers to the base wages and salaries employees normally receive.Compensation forms such as bonuses, commissions and profit sharing plans are incentivesdesigned to encourage employees to produce results beyond normal expectation. Benefitssuch as insurance, medical, recreational, retirement, etc., represent a more indirect typeof compensation. The amount of compensation received by an employee should reflectthe effort put in by the employee, the degree of difficulty experienced while expendinghis energies, the competitive rates offered by others in the industry and the demand-supply position within the country, etc. The pay structure of a company depends onseveral factors such as labour market conditions, company’s paying capacity and legalprovisions. Under the Workmen’s Compensation Act, 1923, “Wages for leave period,holiday pay, overtime pay, bonus, attendance bonus, and good conduct bonus” form partof wages. Under The Payment of Wages Act, 1936, Section 2 (vi), “any award of

168

Human Resource Management settlement and production bonus, if paid, constitutes wages. Under the Payment of WagesAct, 1948, “retrenchment compensation, payment in lieu of notice and gratuity payableon discharge constitute wages.” The computerization of job evaluation is evolving intoan effective way of supporting the ambitions of global organizations, largely due to thepotential of networkbased job evaluation tools. They fall into two broad areas:Administrative support, and Evaluation decision support.


(i) If we pay predominantly for jobs rather than people, how can we reward the trulyexceptional performing employee?

(ii) Ram won the Rs. 50 lac jackpot prize from an online lottery on Saturday. Why,according to motivation theory, did he quit his job on Monday?

a. Ram’s ability to exert effort had changed.

b. Ram’s individual needs changed.

c. Ram’s individual interests changed.

d. Organisational goals changed.

13.11 KEYWORDS

Base pay

Variable pay

Compensation

Benefits

Productivity

Wage

Dearness Allowance (DA)

Job evaluation

Managerial job

Professional Job


1. Write the difference between Pay and Compensation.

2. Name some benefits of an employee gain from an organisation.

3. Discuss the nature of compensation in brief.

4. What are the different objectives of compensation planning?

5. What are the different factors which determine pay rate?

6. What are the current trends in compensation?

7. Mention different types of remuneration, do not amount to wages.

8. What is performance appraisal?

9. The computerization of job evolution is evolving into an effective way of supportsthe ambitions of global organisation. Discuss.

169

Establishing Pay Plans13.13 SUGGESTED READINGS







170


LESSON

14PAY FOR PERFORMANCE AND FINANCIALINCENTIVES

CONTENTS


14.1 Introduction

14.2 Money and Motivation

14.3 Incentives for Operations Employees and Executives

14.4 Features of Incentive Plans

14.5 Individual Incentives

14.5.1 Piece Rate: Taylor’s Differential Piece Rate System

14.5.2 Merrick’s Differential Piece Rate System

14.5.3 Standard Hour Plans: Halsey Plan

14.5.4 Rowan Plan

14.5.5 Gantt Task and Bonus Plan

14.5.6 Bedeaux Plan

14.5.7 Haynes Manit Plan

14.5.8 Emerson’s Efficiency Plan

14.5.9 Accelerated Premium Bonus Plan

14.6 Bonuses

14.7 Merit Pay and Individual Incentive Plans

14.7.1 Lumpsum Merit Pay

14.8 Commissions for Sales People

14.8.1 Salary Plan

14.8.2 Commission Plan

14.8.3 Combination Plan

14.9 Organisation wide Incentive Plans

14.9.1 Profit Sharing

14.9.2 Gain Sharing

14.9.3 Employees Stock Ownership Plans

14.9.4 Practices in Indian Organisations

14.10Let us Sum up


14.12Keywords



171

Pay for Performance andFinancial Incentives14.0 AIMS AND OBJECTIVES

In this lesson we shall discuss about pay and financial incentives. After going throughthis lesson you will be able to:

(i) Discuss pay for performance and financial incentives.

(ii) Analyse incentives for employees, executives, individual and organisation wideincentive plans.

14.1 INTRODUCTION

The system of wage payment is an important issue between labour and management.Employees could be paid either on the basis of time spent or contributions made by them.the fringe benefits offered by various organisations in India may be broadly put into fivecompartments–payment for time not worked, employee security, safety and health, welfareand recreation facilities and old age and retirement benefits.

14.2 MONEY AND MOTIVATION

Intrinsic motivation stems from feelings of achievement and accomplishment and isconcerned with the state of self-actualisation in which the satisfaction of accomplishingsomething worthwhile motivates the employee further so that this motivation is self-generated and is independent of financial rewards. Some of the intrinsic motivators arepraise, recognition, responsibility, esteem, power, status, challenges and decision-makingresponsibility.

14.3 INCENTIVES FOR OPERATIONS EMPLOYEES ANDEXECUTIVES

Incentive plans envisage a basic rate usually on time basis applicable to all workers andincentive rates payable to the more efficient among them as extra compensation fortheir meritorious performance in terms of time, costs and quality. The incentive ratesmay take the form of bonus or premium. Bonus means payment to workers of the entirebenefit accruing from savings in costs, time, improvement in quality, etc. Premium meansthe benefits accruing to the firm as the result of higher output or better quality will beshared equally or on some agreed basis between the management and the workers.

14.4 FEATURES OF INCENTIVE PLANS

The characteristics of these plans are as follows:

1. Minimum wages are guaranteed to all workers.

2. Incentives by way of bonus, etc., are offered to efficient workers for the timesaved.

3. A standard time is fixed and the worker is expected to perform the given workwithin the standard time. The standard time is set after making time studies for theperformance of a specific job.

l Guaranteed minimum wages: It must guarantee minimum wages irrespectiveof the performance of the worker.

l Simple: It must be simple to operate and easy to understand.

l Equitable: All workers should get an equal opportunity to earn the incentive pay.Equal pay for equal work should be the rule.

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Human Resource Management l Economical: The incentive plan should not be a costly affair. The benefits mustexceed the costs.

l Flexible: It must be reasonably flexible so as to take care of changes in technology,demand for and supply of skills, competitive rates in the industry, etc.

l Support: The incentive plan should take workers and unions into confidence. Itshould be implemented after consulting the workers and their union. Generallyspeaking, it should be the outcome of mutual trust and understanding betweenmanagement and workers.

l Motivating: The incentive should be large enough to motivate the worker to superiorperformance. At the same time, there should be checks and balances to ensurethat the worker does not exert himself to painful levels, affecting the quality.

l Prompt: There should be very little time gap between performance and payment.As soon as the job is finished, the worker should get his (incentive) earnings promptly.

Incentive plans incorporate all the advantages of piece rate wages but they resembletime wages so far as the payments are concerned. Under Incentive Plans, the employeras well as the employee share the benefit of time saved. The various incentive planshave benefited both workers and employers, as they result in higher wages, lower labourturnover and better industrial relations and morale. The following are the more importantincentive plans of wage payment.

14.5 INDIVIDUAL INCENTIVES

Individual incentive plans are the most widely used pay for performance plans in industry.These pay plans attempt to relate individual effort to pay. Popular approaches includepiece work plans, (such as Tayor's differential piece rate plan, Merrick's differentialpiece rate plan, etc.), standard hour plans, (such as Halsey plan, Bedeaux plan, Emerson’splan etc.) merit pay raises, lumpsum merit payments, sales incentives and commissions.

14.5.1 Piece Rate: Taylor’s Differential Piece Rate System

F W Taylor, the father of Scientific Management, originated this system. The main featuresof this plan are:

i. There shall be two piece work rates, one is lower and the other is higher.

ii. The standard of efficiency is determined either in terms of time or output based ontime and motion study.

iii. If a worker finishes work within standard time (or produces more than standardoutput within time) he will be given high piece rate.

This system penalises the slow worker by paying low rate because of low production,rewards an efficient worker by giving him high rate because of higher production.Indirectly, this system gives no place to inefficient work. In other words, if the output ofa worker is less than the standard output, he is paid a low rate and vice versa.

14.5.2 Merrick’s Differential Piece Rate System

We have seen that in Taylor’s Method, the effect on the wages is quite severe in themarginal cases. To remove this defect, Merrick came out with a Multiple Piece RateSystem. There are three piece rates under this scheme instead of two, and workersproducing below the standard output are not penalised by the low piece rate. Since theearnings increase with increased efficiency, performance above the standard will berewarded by more than one higher differential piece rate. The basic features of this

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Pay for Performance andFinancial Incentives

scheme are: (a) upto 83% of the standard output workers are paid at the ordinary piecerate (b) 83% to 100% at 110% of the ordinary piece rate, and (c) above 100% at 120%of the ordinary piece rate.

14.5.3 Standard Hour Plans: Halsey Plan

This plan, originated by F A Halsey (an American engineer) recognises individual efficiencyand pays bonus on the basis of time saved. The main features of this plan are:

1. Standard time is fixed for each job or operation.

2. Time rate is guaranteed and the worker receives the guaranteed wages irrespectiveof whether he completes the work in the time allowed or takes more time to do thesame.

3. If the job is completed in less than the standard time, the worker is paid a bonus of50% (33 1/3 per cent under Halsey-Weir Plan) of time saved at time rate in additionto his normal time wages.

Total Earnings = Time taken × Hourly Rate plus Bonus

Bonus = 50% of time saved

Merits

1. It is easy to follow and relatively simple to operate;

2. It guarantees minimum wage and thus provides security to the employees;

3. It provides increasing benefit and incentive to efficient workmen;

4. The benefit from time saved is shared equally between the employer and theworkman;

5. It emphasises the saving of time rather than larger output, hence the workers donot resist its adoption.

6. The system is based on time saved and not on output, thus preventing over production.

7. Saving in time reduces both labour cost and overhead expenses.

Demerits

1. The worker may be encouraged to rush through work and thus neglect the qualityof production to save more time and earn higher bonus;

2. It does not provide adequate incentive to highly efficient workmen as it involvessharing of the benefit with employers.

3. Fixation of standard is not easy.

4. Earnings are reduced at high level of efficiency. Therefore, it does not act as asufficient incentive.

14.5.4 Rowan Plan

This plan was introduced by D. Rowan in 1901. As before, the bonus is paid on the basisof time saved. But unlike a fixed percentage in the case of Halsey plan, it takes intoaccount a proportion as follows:

Time saved

Time allowed

Thus, under this plan bonus is that proportion of the wages of time taken which the timesaved bears to the time allowed or standard time.

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Human Resource Management Bonus = Time taken × Hourly rate

Total earnings = Time Taken × Hourly Rate + Bonus

Merits

1. It assures minimum time wages. It is more liberal than the Halsey plan in that itprovides incentive to work and earn extra remuneration.

2. As the increase in effort is much less rewarded after a certain stage, an automaticcheck for limiting production of inferior quality of goods is ensured.

3. This automatic check enables the worker to earn a fair wage, because there is lesschance of rate-cutting by the employer, as he is not paying extraordinary wages.

Demerits

1. The ordinary worker may find the bonus calculation a bit difficult.

2. Like Halsey plan, this plan does not encourage extraordinary efficiency. Forexample, if the time saved is more than half the total, earnings begin decreasing.

14.5.5 Gantt Task and Bonus Plan

This plan combines time, piece and bonus systems. The main features of this plan are:

1. Day wages are guaranteed.

2. Standard time for task is fixed and both time wages as well as a high rate per pieceare determined.

3. A worker who cannot finish the work within the standard time is paid on timebasis.

4. If a worker reaches the standard, he will be paid time wage plus a bonus at fixedpercentage (20%) of normal time wage.

5. If the worker exceeds the standards, he is paid a higher piece rate.

Merits

1. This plan is not as harsh as the Taylor’s differential piece rate system. Hence it ismore acceptable to the workers.

2. Workers can easily understand its working.

3. It ensures guaranteed time wages to inefficient workers also.

4. It makes distinction between efficient and inefficient workers because the systemensures time wages for inefficient workers and piece wages plus 20% bonus forefficient workers.

5. Labour cost per unit decreases with increase in production due to incentive forefficiency given under this plan.

Demerits

1. It classifies workers into two competing categories (efficient and inefficient) andthis may bring disunity among workers.

2. When this method is used, labour cost will be high for low production.

3. Extreme care is to be exercised in fixing the guaranteed time rate and determinationof standard output. Any error due to lack of experience will lead to unfavourableconsequences.

175


14.5.6 Bedeaux Plan

Under this plan, every operation or job is expressed in terms of so many standard minutes,which are called ‘Bedeaux points’ or “B’s”, each B representing one minute throughtime and motion study. Upto 100% performance, i.e., upto standard B’s, a worker is paidtime wages without any premium for efficiency. If the actual performance exceeds thestandard performance in terms of B’s, then 75% of the wages of the time saved is paidto the worker as bonus and 25% is earned by the foremen. For example, if the standardtime is 10 hours actual time taken is 8 hours and rate per hour Re.1, the worker will get:

= 8 hours at Re 1 + 75% of 120 (points saved) x 1/60

= Rs 9.50.

14.5.7 Haynes Manit Plan

This plan is just like the above plan, i.e., the Bedeaux plan with the difference that:

a. The standard is fixed in terms of standard minute known as ‘Manit’, instead ofBedeaux. Manit stands for man-minute.

b. The bonus is only 50% as against 75% of the Bedeaux plan. Of the remaining50%, 10% bonus is paid to supervisors and 40% is retained by the employers.

14.5.8 Emerson’s Efficiency Plan

Under this plan, when the efficiency of the worker reaches 67% he gets bonus at thegiven rate. The rate of bonus increases gradually from 67% to 100% efficiency. Above100% bonus will be at 20% of the basic rate plus 1% for each 1% increase in efficiency.

14.5.9 Accelerated Premium Bonus Plan

This plan is also known as Sliding Scale Bonus Plan because the premium is paid atvarying rates for increasing efficiency. In this plan, as efficiency of worker improves, hisearnings would increase in greater proportion. This plan is most suitable for foremen andsupervisors because it will stimulate them to get higher production from workers undertheir supervision but it is not advisable to use it for machine operators who may rushthrough work to earn more, disregarding quality of production.

There is no simple formula for this scheme. Therefore, each firm has to devise its ownformula. However, by way of illustration, a graph of y = 0.8x2 may be given as generalpicture of the scheme (where x is percentage efficiency 100 ÷ and y = wages).

Thus,

Percentage efficiency 100 110 130 150

x 1 1.1 1.3 1.5

x2 1 1.21 1.69 2.25

Y = 0.8x2 0.8 0.97 1.35 1.8

An Individual Incentive plan is likely to be more effective under certain circumstances:

i. The task is liked.

ii. The task is not boring.

iii. The supervisor reinforces and supports the system.

iv. The plan is acceptable to employees and managers and probably includesthem in the plan's design.

v. The incentive is financially sufficient to induce increased output.

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Human Resource Management vi. Quality of work is not especially important.

vii. Most delays in work are under the employees' control.

T.L. Ross et al, "The Incentive Switch", Management Review, 18, May 1989.

14.6 BONUSES

A bonus is an incentive payment that is given to an employee beyond one's normalstandard wage. It is generally given at the end of the year and does not become part ofbase pay.

Box 14.1: The Payment of Bonus Act, 1965

The Act defines an employee who is covered by it as one earning Rs 2,500 p.m. (w.e.f. 1.4.93) basic plusdearness allowance and specifies the formula for calculating the allocable surplus from which bonus is tobe distributed. The minimum bonus to be paid has been raised from 4 per cent to 8.33 per cent (w.e.f.25.9.75) and is sought to be linked to increased productivity in recent times. Through collective bargaining,the workers, through their representative union, can negotiate for more than what the Act provides and getthe same ratified by the government, if necessary . In the absence of such a process, the Act makes itmandatory to pay bonus to employees (who have worked in the unit for not less than 30 working days ina year) following a prescribed formula for calculating the available surplus. The available surplus isnormally the gross profits for that year after deducting depreciation, development rebate/investmentallowance/development allowance, direct tax and other sums referred to in Sec. 6 The Act applies to everyfactory or establishment in which 20 or more persons are employed in an accounting year. Currently theposition is such that even if there is a loss, a minimum bonus needs to be paid treating the same as deficitto be carried forward and set off against profits in subsequent years (Sec. 15). The Act is proposed to bechanged since the amount of bonus, the formula for calculating surplus, and the set off provisions have allbeen under serious attack from various quarters.

14.7 MERIT PAY AND INDIVIDUAL INCENTIVE PLANS

Merit pay is a reward based on how well an employee has done the assigned job. Thepayout is dependent on individual employee's performance. Performance is evaluated ina subjective fashion. Advocates of merit pay call it the most valid type of pay increase.Rewarding the best performers with the largest pay is claimed to be a powerful motivator.Performance that is rewarded is likely to be repeated. People tend to do things that arerewarded. Generally speaking, individuals are goal oriented and financial rewards canshape an individual's goals over time. When high achievers are rewarded, they set thebenchmarks for others to follow. Merit raises, unfortunately, may not always achievetheir intended purpose. Unlike a bonus, merit raise may be perpetuated year after yeareven when performance declines. When this takes place, employees come to expect theincrease and see it as being unrelated to their performance. Evaluating merit, further, isnot easy. In most cases, merit raises may be based on seniority or favoritisms or sometimesjust to cover rising inflationary pressures. Subordinates who are politically, socially andfamilially connected inside and outside the organisation, who have clout and who canhurt the supervisor in some way are likely to receive a larger share of the merit pie thantheir performance may warrant. Compensation specialists find fault with merit raises onthe following grounds:

i Tying pay to goals may force people to be narrow-minded; they may focus ongoals that are measurable, easy to achieve and avoid the more important goals.

ii It is difficult to define and measure performance objectively.

iii Employees fail to make the connection between pay and performance.

iv Every supervisor may not be a competent evaluator.

177


v There may be lack of honesty and cooperation between management andemployees. Politics may come to pay a major role in recognising meritoriousperformers.

vi The size of merit award has little effect on performance.

Merit plans can work in cases where the job is well designed and the performancecriteria are both well delineated and assessable.

14.7.1 Lumpsum Merit Pay

In this case, employees receive a single lumpsum payment at the time of their review –which in any case, is not added to their base pay. Such merit increases help the employerkeep the wage bill under control as they do not contribute to escalating base salarylevels. Employees receiving the fat, lumpsum merit payments are able to clearly identifythe linkage between pay and performance.

14.8 COMMISSIONS FOR SALES PEOPLE

Compensation plans for sales personnel generally consist of a straight salary plan, astraight commission plan or a combination salary and commission plan.

14.8.1 Salary plan

Some firms pay sales people only a salary. Such a plan is useful when serving andretaining existing accounts is being emphasised more than generating new sales andaccounts. This approach is generally used to protect the income of new salesrepresentatives at the beginning of their career, trying to build their rapport with customers.It can also be put to use when both new and existing sales reps are supposed to spend alot of time learning about and selling customers new products and services.

14.8.2 Commission plan

In this plan, a sales representative receives a percentage of the value of the sales made.He receives no compensation, if no sales are made. The sales representative mustinevitably sell in order to earn. High-performing sales people could earn record commissionsif they are able to deliver results. Sales costs, thus, are directly proportional to the salesmade (rather than remaining fixed) and as such companies would be more than willing topay commissions based on sales. The plan is quite easy to understand and compute.However, it is not without drawbacks. The emphasis here is always on sales volumerather than on profits. Sales representatives tend to concentrate more on generatingsales volumes and on high-value items neglecting other important duties like servingsmall accounts, cultivating dedicated customers, and pushing hard-to-sell items. Earningstend to fluctuate widely between good and poor periods of business. Wide variations inincome would occur as sales people compete with other and this could ultimately lead tonegative feelings of bitterness, jealousy and anguish among themselves. Again, salespeople may be tempted to grant price concessions (against company policy) to push upsales.

14.8.3 Combination plan

The most frequently used form of sales compensation is the salary plus commission,which combines the stability of a salary with the performance aspect of a commission.Many companies also pay sales representatives salaries and then offer bonuses as apercentage of base pay tied to meeting various levels of sales targets or other criteria. Acommon split is 70% salary to 30% commission, although the split varies by industry andwith other factors. Combination plans have many plus points. They offer sales people afloor to their earnings as they get a fixed salary for servicing current accounts and earn

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Program Dimension

1. Philosophy;theory

2. Primary goals

3. Subsidiary goals

4. Worker’sparticipation

5. Suggestion making

6. Role of supervisor

7. Role ofmanagers

8. Bonus formula

9. Frequency ofpayout

10. Role of union

11. Impact onmanagement style

Scanlon

Original single unit; shareimprovements; people capableof and willing to makesuggestions, want to makeideas

Productivity improvement

Attitudes, communi-cation,work behaviours, quality,cost reduction

Two levels of committees;screening (one) and production(many)

Formal system

Chair of production committee

Direct participation in bonuscommittee assignments

Payroll

Sales

Monthly

Negotiated provisions;membership on screeningcommittee

Substantial

Rucker

Primarily economicincentive; some reliance onemployees’ participations

Improved productivity

Attitudes, communication,work behaviours, quality,cost reduction

Screening committee andproduction committee(sometimes)

Formal system

None

Idea coordinators: Evaluatesuggestions, committeeassignments

value Production

payroll unit-Bargaining

Monthly

Negotiated provisions;screening committeemembership

Slight

Improshare

Economic incentivesincrease performance

Improved productivity

Attitudes, workbehaviours

Bonus committee

None

None

None

Engineering standard

×BPF*

Total hours worked

Weekly

Negotiated provisions

None

extra incentives for superior performance. Combination plans offer greater designflexibility as they can be set up to help maximise company profits. They can develop themost favourable ratio of sales expenses to sales.

Box 14.2: Comparative Analysis of three Gainsharing Plans

14.9 ORGANISATION WIDE INCENTIVE PLANS

Organisation wide incentive plans reward employees on the basis of the success of theorganisation over a specified time period. These plans seek to promote a ‘culture ofownership’ by developing a sense of belongingness, cooperation and teamwork amongall employees. There are three basic types of organisation-wide incentive plans: profitsharing, gain sharing and employee stock ownership plans.

14.9.1 Profit Sharing

Profit sharing is a scheme whereby employers undertake to pay a particular portion ofnet profits to their employees on compliance with certain service conditions andqualifications. The purpose of introducing profit sharing schemes has been mainly tostrengthen the loyalty of employees to the firm by offering them an annual bonus (overand above normal wages) provided they are on the service rolls of the firm for a definiteperiod. The share of profit of the worker may be given in cash or in the form of sharesin the company. These shares are called bonus shares. In India, the share of the workeris governed by the Payment of Bonus Act.

Merits

1. The idea of sharing the profits inspires the management and the worker to besincere, devoted and loyal to the firm.

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2. It helps in supplementing the remuneration of workers and enables them to lead arich life.

3. It is likely to induce motivation in the workers and other staff for quicker and betterwork so that profits of the firm are increased which in turn increases the share ofworker therein.

4. Workers do not require close supervision, as they are self-motivated to put in extralabour for the prosperity of the firm.

5. It attracts talented people to join the ranks of a firm with a view to share theprofits.

Demerits

1. Profits sharing scheme is, in practice, a fair-weather plan. Workers may get nothingif the business does not succeed.

2. Management may dress up profit figures and deprive the workers of their legitimateshare it profits.

3. Workers tend to develop loyalty toward firm discounting their loyalty toward tradeunions, thus impairing the solidarity of trade unions.

4. Fixation of worker’s share in the profits of firm may prove to be a bone of contentionin the long run.

14.9.2 Gain Sharing

A gain sharing plan aims at increasing productivity or decreasing labour costs and sharingthe resultant gains (usually a lumpsum payment) with employees. It is based on amathematical formula that compares a baseline of performance with actual productivityduring a given period. When productivity exceeds the base line an agreed-upon savingsis shared with employees. Gainsharing is built around the idea that involved employeeswill improve productivity through more effective use of organisational resources. Threemajor types of gainsharing plans are currently in use: Scanlon Plan, Rucker, Plan, andImproshare. Improshare stands for improved productivity through sharing. This plan issimilar to a piece rate except that it rewards all employees in an organisation. Input ismeasured in hours and output in physical units. A standard is calculated and weeklybonuses are paid based on the extent to which the standard is exceeded. The employeesand the organisation each receive payment for 50 per cent of the improvement.

Unlike profit sharing plans which have deferred payments, gainsharing plans are currentdistribution plans. They are directly related to individual behaviour and are distributed ona monthly or quarterly basis. Gainsharing plans tend to increase the level of cooperationacross workers and teams by giving them a common goal. Managers are not required tobase their calculations on complex mathematical formulae, nor they are required to closelylook into the specific contributions of individuals or independent teams. It is easier forboth, to formulate bonus calculations and to achieve employee acceptance of thoseplans. Gainsharing plans, however, protect low performers. Where rewards are spreadacross a large number of employees, poor performers may get rewards for nonperformance at the cost of the bright performers. Gainsharing plans may fail due toother reasons as well: poorly designed bonus formulae, lack of management support foremployees' participation, increasing cost factors that undermine the bonus formula, poorcommunication, lack of trust, and apathy on the part of employees. To develop anorganisation-wide incentive plan that has a chance to survive, let alone succeed careful,in depth planning must precede implementation. A climate of trustworthy labour-management in also absolutely essential. The financial formula should be simple andshould measure and reward performance with a specific set of measurable goals and aclear allocation method.

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Human Resource Management 14.9.3 Employees Stock Ownership Plans

Employee stock ownership plans originated in the USA in early 90s. Such plans have notgained popularity in India till recently, due to the absence of legal provisions in theCompanies Act covering stock options. However, in 1988, the Government has allowedstock options to software professionals, recognising the importance of retaining talentwithin the country.

Under employee stock option plan, the eligible employees are allotted company’s sharesbelow the market price. The term stock option implies the right of an eligible employee topurchase a certain amount of stock in future at an agreed price. The eligibility criteriamay include length of service, contribution to the department/division where the employeeworks, etc. The company may even permit employees to pay the price of the stockallotted to them in installments or even advance money to be recovered from their salaryevery month. The allotted shares are generally held in trust and transferred to the nameof the employee whenever he or she decides to exercise the option. The stock optionempowers the employee to participate in the growth of the company as a part owner. Italso helps the company to retain talented employees and make them more committed tothe job.

Employee stock options are welcomed everywhere due to their in-built motivating potential.Some of the powerful benefits offered by Esops may be catalogued thus:

i. Stock options are a tremendous motivator because they directly link performanceto the market place. The underlying rationale is to let employees add value to acompany and benefit from it on the same terms as any other provider of risk-capital.

ii. Employees remain loyal and committed to the company. To become part owners,everyone has to stay for a while, contribute their best and then share the resultantgains according to an agreed criteria. Stock options motivate people to give theirbest to the company because individual performances will translate into share priceincreases only if it is part of a larger collective effort.

iii. By transforming your employee into a stockholder, stock options foster a long-termbond between the employee and the company. Employees begin to look atthemselves as real owners in place of just paid servants of a company. ESOPs giveemployees a ‘piece of the action’ so that they can share in the growth andprofitability of their company. Everyone also loves the concept of employeeownership as a kind of “People's capitalism.”

iv. ESOPs underscore the importance of team effort among employees.

v. Better industrial relations, reduced employee turnover, lesser supervision, increaseddividend income, etc., are other incidental benefits.

ESOPs have their critics as well who attack the method on the following grounds:

vi Only profitable companies can use the tool

vii Stock prices do not always reflect fundamentals

viii Falling share price could mean losses for employees

ix The inability to cash in quickly can dampen interest

x Lack of transparency can earn accusations of favouritism

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Figure 14.1: Type of Fringe Benefits

Employees' sharing the platform with owners, evidently, can be a disadvantage becausethey may feel 'forced' to join, thus placing their financial future at great risk (e.g., employeeswho opted for ESOPs during the software boom in the late 90s have suffered hugelosses when stock prices crashed subsequently). Another drawback is that ESOps couldbe used by managements to fend off unfriendly takeover attempts. Holders of stockoptions often align with management to turn down bids that would benefit outsideshareholders but would replace management and restructure operations. Surely, ESOPs

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Human Resource Management are not meant to entrench inefficient management. Despite these disadvantages, ESOPshave grown in popularity in recent times.

14.9.4 Practices in Indian Organisations

Companies like Mastek, Godrej and Boyce have tried to link their rewards to team basedperformance in recent times quite successfully

Team-based rewards: Best practices

i. Set quantifiable targets when evaluating team performance for rewards.

ii. Ensure that top performers in each team earn the highest level of rewards.

iii. Link team performance closely to the company's profits and overall financial health.

iv. Avoid subjectivity when assessing both the team and its member's performance.

v. Offer uniform non-team based incentives to employees within each grade.

Other companies like Pfiger, Siemens have been linking rewards to shop floor workersbased on the worker ability to meet productivity as well as performance targets. In anycase, the emerging picture is quite clear especially in the post liberalisation era in India.The start that need entrepreneurial action from its employees will have to offer largedoses of cash, goal linked incentive pay and possibly stock options to link compensationto profits. Mature companies, whose focus is on managing their earnings per share andprotecting market shares, will have to seek out managerial talent and reward it withflexible tax-friendly compensation packages with benefits designed to improve the qualityof working life.

Check Your Progress


(a) ...................... is about Manging data with reports facilities.

(b) ...................... provides guidances to the evaluation.

(c) ...................... are guaranteed to all workers incentive plan.

(d) ...................... was the father of scientific management.

(e) Taylor’s differential ...................... differentiate two work rates, one is lower &other is higher.

2. Write True and False against each statement.

(a) Computerised Job evaluation falls into two broad areas. ( )

(b) Evaluation of decision support Manages the data with reporting. ( )

(c) Incentive plans do not incorporate all the advantages of piece rate wages. ( )

(d) Habey plan was for standard house plans. ( )

(e) Bonus = (Time saved /Standard time) × Time taken × having rate. ( )

(f) Bonus is an incentive payment that is given to an employee beyond one’snormal standard wage. ( )

3. Discuss commissions for sales people?

4. What is lumpsum merit pay ?

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Pay for Performance andFinancial Incentives14.10 LET US SUM UP

The various incentive plans have benefited both workers and employers, as they result inhigher wages, lower labour turnover and better industrial relations and morale. Merit payis a reward based on how well an employee has done the assigned job. The payout isdependent on individual employee’s performance. Performance is evaluated in asubjective fashion. Profit sharing is a scheme whereby employers undertake to pay aparticular portion of net profits to their employees on compliance with certain serviceconditions and qualifications. Under employee stock option plan, the eligible employeesare allotted company’s shares below the market price. The term stock option implies theright of an eligible employee to purchase a certain amount of stock in future at an agreedprice. The eligibility criteria may include length of service, contribution to the department/division where the employee works, etc.


(i) You are a small business owner wishing to establish a benefits programme for youremployees. What things should you consider to ensure that the programme is asuccess for your employees?

(ii) Your company has just developed a new company sponsored savings plan foremployees. Develop a strategy to publish the programme and to encourage toparticipate in it.

14.12 KEYWORDS

Incentives

Bedeaux plan

Merit pay

Bonus

Profit sharing



(a) Taylor’s piece rate system

(b) Merrick’s piece rate system

(c) Halsey plan

(d) Rowan plan

(e) Gantt task

(f) Bonus plan

2. Discuss how commission for sales people is distributed?

3. Give comparative analysis of three gain sharing plans.

4. What are the merits and demerits of profit sharing?

5. Mention some of the powerful benefits offered by ESOP.

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Human Resource Management 14.14 SUGGESTED READINGS







LESSON

15BENEFIT AND SERVICES

CONTENTS


15.1 Introduction

15.2 Significance of Benefit and Services

15.2.1 Objectives

15.2.2 Goals for Benefits

15.3 Classification of Employee Benefits

15.3.1 Disability Income Continuation

15.3.2 Loss of Job Income Continuation

15.3.3 Deferred Income

15.3.4 Spouse and Family Income Protection

15.3.5 Health & Accident Protection

15.3.6 Property & Liability Protection

15.3.7 Employees Services "Fringe"

15.3.8 Pay for Time Not Worked

15.3.9 Time-off from Work Without Pay

15.3.10Costing Benefits

15.4 Statutory Welfare Provisions in India

15.4.1 The Factories Act, 1948

15.4.2 The Mines Act, 1952

15.4.3 The Plantation Labour Act, 1951

15.4.4 The Motor Transport Workers Act, 1961

15.4.5 The Contract Labour (Regulation & Abolition) Act, 1970

15.4.6 Canteen

15.4.7 Crèches

15.4.8 Labour Officer

15.5 Non-statutory Welfare Provisions

15.5.1 Educational Facilities

15.5.2 Housing Facilities

15.5.3 Transport Facilities

15.5.4 Recreational Facilities

15.5.5 Consumer Cooperative Societies Contd....

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In this lesson we shall discuss about benefit and services. After studying this lesson youwill be able to:

(i) Discuss significance of benefit and services and classification employee benefit

(ii) Analyse statutory and non-statutory welfare provision.

(iii) Understand flexible, insurance benefits and retirement benefits.

15.1 INTRODUCTION

Benefit is a generic word and used to describe a substantial elements of compensationwhich is unique and provided to the employee in non-cash form (there are some exception)and known as fringe benefits and services, other terms like perquisites perks, allowancesetc. , are also used. There is a distinction between benefits and services. Benefit appliesto those items for which a direct monitory value to the employees, can be ascertained, asin the case of pension, insurance, holiday pay, etc. Services applies to such items ascompanies newspaper, companies holiday homes, etc. , for which direct money valuecannot be readily established by the employee. Perks is something in addition to thepayment; car fuel etc. Allowance could be sum of money given at regular interval tocover some special circumstances like canteen allowance, clothing allowance, etc.

15.2 SIGNIFICANCE OF BENEFIT AND SERVICES

Benefits and Services are indirect compensation (as against direct compensation oncritical job factors and performance) because they are usually extended as condition ofemployment or with intention of inducement or motivation and are not directly related toperformance. Fringe benefits are suppose to be benefit at the fringes, or edge of themain pay. Now this has been replaced by simple benefits which forms a substantial partof the total compensation.

Employee benefits and services include any benefits that the employee receives in additionto direct remuneration.

15.6 Flexible Benefits

15.7 Insurance Benefits

15.8 Retirement Benefits and Other Welfare Measures to Build Employee Commitment

15.8.1 Provident Fund

15.8.2 Pension

15.8.3 Deposit Linked Insurance

15.8.4 Gratuity

15.8.5 Medical Benefit

15.9 Let us Sum up


15.11 Keywords



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Benefit and ServicesA formal definition is:

"Fringes embrace a broad range of benefits and services that employees receive as partof their total compensation package—pay or direct compensation—is based on criticaljob factors and performance. Benefits and services, however, are indirect compensationbecause they are usually extended as a condition of employment and are not directlyrelated to performance."

Employee benefits are elements of remuneration given in addition to the various formsof cash pay. They provide a quantifiable value for individual employees, which may bedeferred or contingent like a pension scheme, insurance cover or sick pay, or may providean immediate benefit like a company car. Employee benefits also include elements, whichare not strictly remuneration, such as annual holidays.

The terms 'fringe benefits' and perks (perquisites) are sometimes used derogatively, butshould be reserved for those employee benefits which are not fundamentally cateringfor personal security and personal needs.

15.2.1 Objectives

The objectives of the employee benefits policies and practices of an organisation mightbe:

l to increase the commitment of employees to the organization;

l to provide for the actual or perceived personal needs of employees, including thoseconcerning security, financial assistance and thus, provision of assets in addition topay, such as company cars and petrol;

l to demonstrate that the company cars for the needs of its employees;

l to ensure that an attractive and competitive total remuneration package is providedwhich both attracts and retains high-quality staff;

l to provide a tax-efficient method of remuneration which reduces tax liabilitiescompared with those related to equivalent cash payments.

Note that these objectives do not include 'to motivate employees'. This is because benefitsseldom have a direct and immediate effect on performance unless they are awarded asan incentive; for example, presenting a sales representative with a superior car (e.g. aBMW) for a year if he or she meets a particularly demanding target. Benefits can,however, create more favourable attitudes toward the company leading to increasedlong-term commitment and better performance.

Why fringe Benefits?

1. Altruistic/Paternalistic consideration

2. Statutory requirements

3. Concern for well being

4. Damage and hazard of industrial working

5. Tax-planning consideration

6. Competitive consideration

7. Concern for quality of work-life

8. Mitigate fatigue and monotony

9. Discourage labour unrest

10. Reduce attrition

11. Build companies image

12. Attract, retain and motivate employees

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Human Resource Management 15.2.2 Goals for Benefits

Benefits should be looked at as part of the overall compensation strategy of the organisation.For instance, an organisation can choose to compete for employees by providing basecompensation, variable pay, or benefits, or perhaps all three. Which approach is chosendepends on many factors, such as the competition, organisational life cycle, and corporatestrategy. For example, a new firm may choose to have lower base pay, and use highvariable incentives to attract new employees, but keep the cost of benefits as low aspossible for a while. Or an organisation that hires predominately younger female employeesmight choose a family-friendly set of benefits including on-site child care to attract goodemployees.

15.3 CLASSIFICATION OF EMPLOYEE BENEFITS

Employee benefits can be further classified under these seven major groups:

(1) Disability income continuation,

(2) Loss-of-job income continuation,

(3) Deferred income,

(4) Spouse or family income continuation,

(5) Health and accident protection,

(6) Property and liability protection, and

(7) A special group of benefits and services called perquisites.

15.3.1 Disability Income Continuation

Disability may be classified as regular, temporary, total, or partial. When employees areunable to work because of an accident or some health-related problem, disability incomecontinuation payments assist them in maintaining their existing lifestyle without majormodification. Various disability income continuation components provide weekly or monthlypayments in lieu of the regular earned income paycheck. The following 11 componentsare among the more commonly available disability income continuation plans. Althoughall components will seldom be available to employees, components can be packaged tomaximize employee protection while maintaining costs within reasonable limits for theemployer. The major components are as follows:

1. Short-term disability

2. Long-term disability

3. Workers compensation

4. Non-occupational disability

5. Social security

6. Travel accident insurance

7. Sick leave

8. Supplemental disability insurance

9. Accidental death and dismemberment.

10. Group life insurance: Total Permanent Disability (TPD)

11. Retirement plans

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Benefit and Services15.3.2 Loss of Job Income Continuation

Loss-of-job-income continuation plans are designed to assist workers during short-termperiods of unemployment due to layoffs and termination. The eight major compensationcomponents that make up this group of benefits are as follows:

1. Unemployment Insurance (UI)

2. Supplemental Unemployment Benefit Insurance (SUBI)

3. Guaranteed Annual Income (GAI)

4. Guaranteed Income Stream (GIS)

15.3.3 Deferred Income

Over the year employers have established the following kinds of compensation componentsto help employees accumulate capital and meet future financial goals:

1. Social Security

2. Qualified Retirement Plan

Pension plan

Profit-sharing plan

Stock bonus plan

3. Simplified Employee Pension Plans (SEPPs)

4. Supplemental Executive

Retirement Plans (SERPs)

5. Supplemental & Executive

Group Life Insurance Plans

6. Stock Purchase Plan

7. Stock Option Plan

8. Stock Grant

15.3.4 Spouse and Family Income Protection

Most employees attempt to ensure the future welfare of their dependents in case of theirdeath. One component, life insurance, and a number of other components previouslyidentified and described have specific features to assists a worker's dependents in theevent of such a calamity. The major components available to protect workers' dependentsare:

1. Life Insurance

2. Retirement Plans

3. Social Security and Medicare

4. Tax-sheltered Annuity

5. Workers' Compensation

6. Accidental Death and Dismemberment

7. Travel Accident Insurance

8. Health Care Coverage

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Human Resource Management 15.3.5 Health & Accident Protection

Organisations provide their employees with a wide variety of insurance services to helpthem and their families maintain a normal standard of living when unusual or unexpectedhealth-related adversities occur. These health care related insurance plans cover medical,surgical, and hospital bills resulting from an accident or illness.

Feature of Health Care Insurance Plans

Medical coverage included in medical plans continues to expend every year. Basicmedical coverage includes payments for diagnostic visits to the doctor's office, outpatientX-rays, and laboratory coverage. Recent additions include home visits by the doctorand ambulatory or outpatient surgery. Although still rated among medical benefits, theannual physical is beginning to appear in more health insurance programmes. Anotherrecent addition to health care insurance plans is the extension of comprehensive healthcare benefits to include some of the survivors of deceased company employees retirees.A relatively new provision covers out patient and non-hospital psychiatric care.

15.3.6 Property & Liability Protection

Of rather recent vintage is the addition of compensation components that provideemployees with personal property and liability protection. These property and liabilityprotection components include the following:

1. Group auto

2. Group home

3. Group legal

4. Group umbrella liability

5. Employee liability

6. Fidelity bond insurance

15.3.7 Employees Services "Fringe"

Employer provides a wide array of services that enhance the lifestyle of employees. Insome cases, these services grant employees time off with pay. In other cases, the servicesinclude highly valued in-kind benefits, which, if purchased by employees themselves,would require the expenditure of after-tax dollars. In providing these services, the employerusually receives a tax deduction and, in most cases, the good or service is not consideredan earned income item. Even in cases in which employees may be charged with additionalearned income for the receipt of the good or service, the charge to income is considerablyless than the cost that would have been incurred by the recipient. The three major sets ofcomponents that constitute the employee services group are:

(1) pay for time not worked

(2) time off without pay and

(3) income equivalent payments and reimbursements for incurred expenses.

15.3.8 Pay for Time Not Worked

Over the past 35 years the drive to reduce working hours and total time spent at workhas focused on providing workers with more paid holidays and longer vacations. Froman employee's perspective, possibly the most desired but frequently unrecognized benefitis time-off with pay. Numerous time-off with pay components have developed, andemployees usually receive their daily base pay rate as the rate paid for these time-offopportunities. The more common time-off with pay components are these:

191

Benefit and Services1. Holidays

2. Vacations

3. Jury duty

4. Election official

5. Witness in court

6. Civic duty

7. Military duty

8. Funeral leave

9. Illness in family leave

10. Marriage leave

11. Paternity leave

12. Maternity leave

13. Sick leave

14. Wellness leave

15. Time-off to vote

16. Blood donation

17. Grievance and contract negotiations

18. Lunch, rest and wash-up periods

19. Personal leave

20. Sabbatical leave

15.3.9 Time-off from Work Without Pay

For years, some organisation have provided employees with sabbaticals without pay. Inthis case, an employee has an opportunity to pursue a special interest area. Although theemployee is not paid, he or she continues to be covered by the employer's medical, lifeinsurance, disability programmes.

Income Equivalent Payments and Reimbursements for Incurred Expenses

The ever-increasing diversity and population of employee benefits have given rise to asignificant number of benefits that can be grouped under a category called nonstatutorybenefits. The majority of benefits previously described are either mandated by legislationor permitted by statutes and given preferential tax treatment.

This group of compensation components includes some of the most diverse and mostdesirable kinds of goods and services employees receive from their employers. Many ofthese components and new ones that appear almost daily have been introduced in responseto changes in the economic situation and to tax demands. This broad group of servicesprovides employees with the opportunity for an improved and more enjoyable lifestyle.Some of the more common components are as follows:

Preferred Benefits of Services

1. Charitable contributions

2. Counselling

Financial

Legal

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Human Resource Management Psychiatric

Psychological

3. Tax preparation opportunities

4. Education subsidies

5. Child adoption

6. Child care

7. Elderly care

8. Subsidized food service

9. Discounts on merchandise

10. Physical awareness and fitness programmes

11. Social and recreational

12. Parking

13. Transportation to and from work

14. Travel expenses

Car reimbursement

Tolls and parking

Tool and entertainment reimbursement

15. Clothing reimbursement/allowance

16. Tool reimbursement/allowance

17. Relocation expenses

18. Emergency loans

19. Credit union

20. Housing

"Such services also give Income-tax".

15.3.10 Costing Benefits

1. Annual cost of benefits and services for all employees.

2. Cost per employee per year.

3. Percentage of payroll (annual cost divided by annual payroll).

4. Cents per hour (cost per employee per hour).

15.4 STATUTORY WELFARE PROVISIONS IN INDIA

These are amenities that are necessary to be provided to the employees under differentlabour legislations. The important legislations which call for these welfare provisionsinclude The Factories Act, 1948, the Plantation Labour Act, 1951, Mines Act, 1952,Motor Transport Workers Act, 1961, and the Contract Labour (Regulation and Abolition)Act, 1970.

15.4.1 The Factories Act, 1948

The Act covers areas including health, welfare, safety, working hours, annual leave withwages and employment of women and children.

193

Benefit and ServicesThe Act is applicable to premises including precincts thereof where ten or more workersare employed with the aid of power, or where 20 or more workers are employed withoutpower.

The welfare amenities provided under the act include:

1. Washing facilities. (Sec. 42)

2. Facilities for storing and dry clothing. (Sec. 43)

3. Sitting facilities for occasional rest for workers who are obliged to work standing.(Sec. 44)

4. First-aid boxes for cup boards - one for every 150 workers, and ambulance facilitiesif there are more than 500 workers. (Sec. 45)

5. Canteens if employing more than 250 workers. (Sec. 46)

6. Shelters, rest rooms and lunch rooms, if employing over 150 workers. (Sec. 47)

7. Crèche, if employing more than 30 women. (Sec. 48)

8. Welfare officer, if employing more than 500 workers. (Sec. 49)

15.4.2 The Mines Act, 1952

The mine owners should make provisions for:

1. Maintenance of crèches where 50 or more women workers are employed.

2. Shelters for taking food and rest if 150 or more workers are employed.

3. A canteen in mines employing 250 or more workers.

4. Maintenance of first-aid boxes and first-aid rooms in mines employing more than150 workers. (Sec. 21)

5. (i) Pit-head baths equipped with shower baths, (ii) sanitary latrines, and (iii) lockers,separately for men and women workers. (Sec. 58 e)

6. Appointment of welfare officer in mines employing more than 500 persons to lookafter the matters relating to the welfare of the workers.

15.4.3 The Plantation Labour Act, 1951

The following welfare measures are to be provided to the plantation workers:

1. A canteen in plantations employing 150 or more workers. (Sec. 11(1))

2. Crèche in plantations employing 50 or more women workers. (Sec. 12)

3. Recreational facilities for the workers and their children. (Sec. 13)

4. Educational arrangements in the estate for the children of workers, where thereare 25 workers' children between the age of 6 and 12. (Sec. 14)

5. Housing facilities for every worker and his family residing on the plantation. Thestandards and specifications of the accommodation, procedure for allotment andrent chargeable from workers etc. , are to be prescribed in the rules by the StateGovernment. (Sec. 15)

6. Medical aid to workers and their families. The workers are also entitled, subject toany rules framed by the State Governments, to sickness allowance and maternityallowance.

7. The State Government may make rules requiring every plantation employer toprovide the workers with such number and type of umbrellas, blankets, raincoats,

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Human Resource Management or other such amenities for protection from rain or cold as may be prescribed.(Sec. 17)

8. Appointment of a welfare officer in plantations employing 300 or more workers.

15.4.4 The Motor Transport Workers Act, 1961

The motor transport undertakings are required to make the following provisions in theareas of health and welfare:

1. Canteens of prescribed standard, if employing 100 or more workers. (Sec. 8)

2. Clean, ventilated, well-lighted and comfortable rest rooms at every place wheremotor transport workers are required to halt at night. (Sec. 9)

3. Uniforms, raincoats to drivers, conductors and line checkers for protection againstrain and cold. A prescribed amount of washing allowance is to be given to theabove-mentioned categories of staff. (Sec. 10)

4. Medical facilities are to be provided to the motor transport workers at the operatingcentres and at halting station as may be prescribed by the State Governments.(Sec. 11)

5. First-aid facilities equipped with the prescribed contents are to be provided in everytransport vehicle. (Sec. 12)

15.4.5 The Contract Labour (Regulation & Abolition) Act, 1970

The contractor is required to provide the following welfare and health measures to thecontract workers:

1. A canteen in every establishment employing 100 or more workers. (Sec. 16)

2. Rest rooms or other suitable alternative accommodation where the contract labouris required to halt at night in connection with work of an establishment. (Sec. 17)

3. Provision for washing facilities. (Sec. 18)

4. Provision for first-aid box equipped with the prescribed contents. (Sec. 19)

15.4.6 Canteen

The Royal Commission on Labour and the Labour Investigation Committee have laidconsiderable emphasis on the provision of a canteen inside the workplace. The ILO, inits Recommendation 102, mentioned this facility and felt that a competent authority ineach country should guide establishments with regard to nutrition, hygiene, finance, etc.In India, the Factories Act places the responsibility on State Governments of makingrules to ensure provisions of a canteen in any specified factory with more than 250workers. Workers should be provided representation in the management of canteens.The Commission on Labour Welfare has suggested that canteens should be run oncooperative basis and that legislation should be amended to empower State Governmentsto make rules to meet the objective of nutrition.

15.4.7 Crèches

The need for setting up crèches in industrial establishments was stressed by the RoyalCommission on Labour in its report way back in 1931. The Factories Act lays down thatin any factory with more than 50 women workers a crèche should be provided andmaintained for children under 6 years in clean and sanitary conditions. The crèche shouldbe under the care of women trained in child care. The crèche should have adequate

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Benefit and Servicesaccommodation, should be properly lighted and ventilated. You must note that the StateGovernment is empowered to make rules in respect of standards, equipment and facilities.Mothers should also be given time to feed their children at necessary intervals.

15.4.8 Labour Officer

The Factories Act, 1948, provides for the statutory appointment of welfare officer in afactory in which 500 or more workers are employed. The State Government may prescribethe duties, qualifications and conditions of service of officers employed. The functions ofa welfare officer include the broad areas of (i) labour welfare (welfare function), (ii)labour administration (personnel function), and (iii) labour relations (conciliation function).

The labour welfare function includes advice and assistance in implementing legislativeand non-legislative provisions relating to health, safety and welfare, hours of work, leave,formation of welfare committees, etc.

The labour administration covers organizational discipline, safety and medicaladministration, liaison, wage and salary administration, education of workers, etc. thelabour relation consists of settlement of disputes, promotion of harmonious labour-management relations, etc.

15.5 NON-STATUTORY WELFARE PROVISIONS

There are employers who have taken the lead and provided a wide variety of welfareamenities to their employees.

15.5.1 Educational Facilities

Economic and social progress is dependent on the quality of workforce. Education playsa crucial role in motivating and preparing the workers for constant change and developmentthat should necessarily happen in industry. The need for imparting necessary educationto workers in India had been emphasized by the Indian Industrial Commission (1918)and the Royal Commission on Labour (1931). The educated worker is naturally morereceptive and responsible.

Educating the worker's family, especially his children, is essential. It is an investment intraining your future workforce. The Central Workers Education Board conducts classesfor industrial workers. The National Commission on Labour and the interest in educatingworkers and running schools for workers' children. However there is no statutoryobligation on any industry to impart education to workers' children except in plantations.

15.5.2 Housing Facilities

Both the Indian Industrial Commission (1918) and the Royal Commission realized theimportance and necessity of improving housing conditions of industrial workers andsuggested various measures. In 1948 the Government of India put forth the IndustrialHousing scheme. The committee on Labour Welfare emphasized the importance of therole of the State Government in acquiring land near industrial areas and renting houses atreasonable rates. The National Commission on Labour recommended that the Governmentshould take the major responsibility for housing. The Government should also use all thehelp that employers can provide and that fiscal and monetary incentives should be providedto employers to make it a viable proposition for them.

15.5.3 Transport Facilities

The growth and expansion of industries has also increased the distance for the workerfrom his place of residence to his place of work. Transport facilities for workers residing

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Human Resource Management far from the workplace is essential to relieve strain and anxiety. Such facilities will, nodoubt also provide greater opportunity for relaxation and reduce the rate of absenteeism.

The Committee on Labour Welfare recommended the provision of adequate transportfacilities to workers to enable them to reach their workplace without loss of much timeand without fatigue. The Committee also recommended that in industrial undertakingswhere transport services are not provided, some conveyance allowance mutually agreedupon between the employer and the employees, should be paid to the employees. Toencourage the employees to have their own conveyance the Committee recommendedthat the employer should advance loans for purchase of bicycles, scooters, etc.

15.5.4 Recreational Facilities

Recreation in the form of music, art, theatre, sports and games can play an importantrole in the mental and physical development of your employees. The importance ofrecreation in creating a healthy climate for industrial peace and progress has beenemphasized by several study teams, committees and commissions.

The ILO Recommendation on Welfare Facilities adopted in 1956 urged upon the membercountries to take appropriate measures to encourage the provision of recreational facilitiesfor the workers in or near the undertaking in which they are employed. These measuresshould, preferably, be taken in such a way as to stimulate and support action by thepublic authorities so that the community is able to meet the demand for recreationalfacilities.

In India; provision of recreational facilities has been made obligatory on employers inplantations. The committee on Labour Welfare recommended that small units could belent a helping hand by the State in organizing recreational facilities for its workers inindustrial housing colonies. Trade unions could also take the initiative and different agenciescould combine their efforts to provide a minimum number of sports and recreationalactivities to keep the labour force fit and healthy. Excursions can be organized, youthsclubs can be formed and holidays homes can be provided for the employees.

15.5.5 Consumer Cooperative Societies

The importance of opening Consumer Cooperative Societies/Fair Price Shops for theworkers was first realized during the Second World War. During this period a largenumber of Consumer Cooperative Societies were organized by the Government for thedistribution of controlled commodities. A committee was set up in 1961 by the NationalCooperative Movement.

The Committee felt that it should be made obligatory for employers and industrialundertakings to introduce consumer cooperative activities in their labour welfareprogrammes. The Indian Labour Conference in 1962 adopted a scheme for setting upconsumer cooperative stores in all industrial establishments including plantations andmines employing 300 or more workers. The employer was to give assistance in the formof share capital working capital, loan, free accommodation and other amenities. TheIndustrial Truce Resolution, 1962, aimed to keep prices of essential commodities low byopening a sufficient number of fair price shops and cooperative stores so that workerswere assured of a regular supply of essential items.

15.6 FLEXIBLE BENEFITS

Inbasket benefits/Ala-carte/Flexible system of benefits and services are gaining popularityin multinational companies.

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Benefit and ServicesAdvantages

1. Employees choose packages that best satisfy their unique needs.

2. Flexible benefits help firms meet the changing needs of a changing workforce.

3. Increased involvement of employees and families improves understanding of benefits.

4. Flexible plans make introduction of new benefits less costly. The new option isadded merely as one among a wide variety of elements from which to choose.

5. Cost containment - The organisation sets the dollar maximum. Employee chooseswithin that constraint.

Disadvantages

1. Employees make bad choices and find themselves not covered for predictableemergencies.

2. Administrative burdens and expenses increase.

3. Adverse selection - employees pick only benefits they will use. The subsequenthigh benefit utilization increases its cost.

4. Subject to non-discrimination requirements in Section 125 of the Internal RevenueCode.

15.7 INSURANCE BENEFITS

Group life insurance scheme provides insurance cover to several employees workingunder one employer, as long as they remain in service of that employer. The employerenters into a master contract with the insurance company on behalf of all employeescovered therein. The premium is paid jointly by the employer and the employee. It is paidto the insurance company at a flat rate without taking note of the age or salary of theemployee. The insurance cover is on each employee’s life and in case of injury or death,the compensation received from the insurance company is paid to the employee or hisnominee. Since the premium is very low, it is highly attractive to salaried people in thelow income category.

15.8 RETIREMENT BENEFITS AND OTHER WELFAREMEASURES TO BUILD EMPLOYEE COMMITMENT

Industrial life generally breaks joint family system. The saving capacity of the employeesis very low due to lower wages, high living cost and increasing aspirations of the employeesand his family members. As such, employers provide some benefits to the employees,after retirement and during old age, with a view to create a feeling of security about theold age. These benefits are called old age and retirement benefits. These benefits include(a) provident fund, (b) pension, (c) deposit linked insurance, (d) gratuity and (e) medicalbenefit.

15.8.1 Provident fund

This benefit is meant for economic welfare of the employees. The Employee’s ProvidentFund, Family Pension Fund and Deposit Linked Insurance Act, 1952, provides for theinstitution of Provident Fund for employees in factories and establishments. ProvidentFund Scheme of the Act provides for monetary assistance to the employees and/or theirdependents during post retirement life. Thus, this facility provides security against socialrisks and this benefit enables the industrial worker to have better retired life. Employeesin all factories under Factories Act, 1948, are covered by the Act. Both the employee

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Human Resource Management and employer contribute to the fund. The employees on attaining 15 years of membershipare eligible for 100% of the contributions with interest. Generally the organisations paythe Provident Fund amount with interest to the employee on retirement or to the dependantsof the employee, in case of death.

15.8.2 Pension

The Government of India introduced a scheme of Employees Pension Scheme for thepurpose of providing Family Pension and Life Insurance benefits to the employees ofvarious establishments to which the Act is applicable. The Act was amended in 1971when Family Pension Fund was introduced in the Act. Both the employer and the employeecontribute to this fund. Contributions to this fund are from the employee contributions tothe Provident Fund to the tune of 1.1/3% of employee wage.

Employee’s Family Pension Scheme, 1971, provides for a Family Pension to the familyof deceased employee as per the following rates:

Pay for month Rate

Rs 800 or more 12% of the basic subject to a maximum of Rs. 150 asmonthly pension.

More than Rs 200 but 15% of the basic subject to a maximum of Rs 96 and aless than Rs 800 minimum of Rs 60 as monthly pension.

Rs 200 or less 30% of the basic subject to a minimum of Rs. 60 asmonthly pension.

This scheme also provides for the payment of a lumpsum amount of Rs 4,000 to anemployee on his retirement as retirement benefit and a lumpsum amount of Rs 2,000 inthe event of death of an employee as life insurance benefits.

15.8.3 Deposit linked insurance

Employees deposit linked insurance scheme was introduced in 1976 under the P.F. Act,1952. Under this scheme, if a member of the Employees Provident fund dies while inservice, his dependents will be paid an additional amount equal to the average balanceduring the last three years in his account. (The amount should not be less than Rs 1000at any point of time). Under the employee’s deposit linked insurance scheme, 1976 themaximum amount of benefits payable under the deposit linked insurance is Rs 10,000.

15.8.4 Gratuity

This is another type of retirement benefit to be provided to an employee either onretirement or at the time of physical disability and to the dependents of the deceasedemployee. Gratuity is a reward to an employee for his long service with his presentemployer.

The Payment of Gratuity Act, 1972, is applicable to the establishments in the entirecountry. The act provides for a scheme of compulsory payment of gratuity by themanagements of factories, plantations, mines, oil fields, railways, shops and otherestablishments employing 10 or more persons to their employees, drawing the monthlywages up to Rs 1,600 per month.

Gratuity is payable to all the employees who render a minimum continuous service offive years with the present employer. It is payable to an employee on his superannuationor on his retirement or on his death or disablement due to accident or disease. Thegratuity payable to an employee shall be at the rate of 15 days wage for every completedyear of service on part thereof in excess of six months. Here the wage means theaverage of the basic pay last drawn by the employee. The maximum amount of gratuitypayable to an employee shall not exceed 20 months’ wage.

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Benefit and Services15.8.5 Medical benefit

Some of the large organisations provide medical benefits to their retired employees andtheir family members. This benefit creates a feeling of permanent attachment with theorganisation to the employees even when they are no longer in service.

Welfare and recreational benefits include: (a) canteens, (b) consumer societies, (c) creditsocieties, (d) housing, (e) legal aid, (f) employee counselling, (g) welfare organisations,(h) holidays homes, (i) educational facilities, (j) transportation, (k) parties and picnics and(l) miscellaneous.

i. Canteens: Perhaps no employee benefit has received as much attention in recentyears as that of canteens. Some organisations have statutory obligation to providesuch facilities as Section 46 of the Factories Act, 1948, imposes a statutory obligationto employers to provide canteens in factories employing more than 250 workers.Others have provided such facilities voluntarily. Foodstuffs are supplied at subsidisedprices in these canteens. Some companies provide lunchrooms when canteenfacilities are not available.

ii. Consumer stores: Most of the large organisations located far from the towns andwhich provide housing facilities near the organisation set up the consumer stores inthe employees colonies and supply all the necessary goods at fair prices.

iii. Credit societies: The objective of setting up of these societies is to encouragethrift and provide loan facilities at reasonable terms and conditions, primarily toemployees. Some organisations encourage employees to form cooperative creditsocieties with a view to fostering self-help rather than depending upon moneylenders, whereas some organisations provide loans to employees directly.

iv. Housing: Of all the requirements of the workers, decent and cheap housingaccommodation is of great significance. The problem of housing is one of the maincauses for fatigue and worry among employees and this comes in the way ofdischarging their duties effectively. Most of the large factories organisations, e.g.,sugar mills, are located very far from towns, at places where housing facilities arenot available. Hence most of the organisations have built quarters nearer to factoryand have thus provided cheap and decent housing facilities to their employees,whilst a few organisations provide and/or arrange for housing loans to employeesand encourage them to construct houses.

v. Legal aid: Organisations also provide assistance or aid regarding legal matters toemployees as and when necessary through company lawyers or other lawyers.

vi. Employee counselling: Organisations provide counselling service to the employeeregarding their personal problems through professional counsellors. Employeecounselling reduces absenteeism, turnover, tardiness, etc.

vii. Welfare organisations, welfare officers: Some large organisations set up welfareorganisations with a view to provide all types of welfare facilities at one centre andappoint welfare officers to provide the welfare benefits continuously and effectivelyto all employees fairly.

viii. Holiday homes: As a measure of staff welfare and in pursuance of government’spolicy, a few large organisations established holiday homes at a number of hillstations, health resorts and other centres with low charges of accommodation, soas to encourage employees to use this facility for rest and recuperations in asalubrious environment.

ix. Educational facilities: Organisations provide educational facilities not only to theemployees but also to their family members. Educational facilities includereimbursement of tution fees, setting up of schools, colleges, hostels, providing

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Human Resource Management grants-in-aid to the other schools where a considerable number of students arefrom the children of employees. Further, the organisations provide rooms and librariesfor the benefit of employees.

x. Transportation: Many large Companies provide conveyance facilities to employees,from their residence to the place of work and back, as most industries are locatedoutside town and all employees may not get quarter facility.

xi. Parties and picnics: Companies provide these facilities with a view to inculcatinga sense of association, belongingness, openness and freedom among employees.These activities help employees to understand others better.

xii. Miscellaneous: Organisations provide other benefits like organising games, sportswith awards, setting up of clubs, community service activities, Christmas gifts,Diwali, Pongal and Pooja gifts, birthday gifts, leave travel concession annual awards,productivity/performance awards, etc.

Check Your Progress

1. What is the difference between profit sharing and gain sharing?

2. What are the various fringe benefits offered by various organizations in India?

3. What are various welfare and recreational benefits?

15.9 LET US SUM UP

The terms 'fringe benefits' and perks (perquisites) are sometimes used derogatively, butshould be reserved for those employee benefits which are not fundamentally cateringfor personal security and personal needs. Benefits should be looked at as part of theoverall compensation strategy of the organisation. Employer provides a wide array ofservices that enhance the lifestyle of employees. In some cases, these services grantemployees time off with pay. The ever-increasing diversity and population of employeebenefits have given rise to a significant number of benefits that can be grouped under acategory called nonstatutory benefits. Amenities that are necessary to be provided tothe employees under different labour legislations. The important legislations which callfor these welfare provisions include The Factories Act, 1948, the Plantation Labour Act,1951, Mines Act, 1952, Motor Transport Workers Act, 1961, and the Contract Labour(Regulation and Abolition) Act, 1970. Group life insurance scheme provides insurancecover to several employees working under one employer, as long as they remain inservice of that employer. Industrial life generally breaks joint family system. The savingcapacity of the employees is very low due to lower wages, high living cost and increasingaspirations of the employees and his family members. As such, employers provide somebenefits to the employees, after retirement and during old age, with a view to create afeeling of security about the old age. These benefits are called old age and retirementbenefits. These benefits include (a) provident fund, (b) pension, (c) deposit linkedinsurance, (d) gratuity and (e) medical benefit.


As a manager of a staff of customer service executives in a service business, what typeof pay-for-performance plan do you think would work best? What about for automobilemachines in a large car dealership company listed in the Bombay Stock Exchange?

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Benefit and Services15.11 KEYWORDS

Fringe Benefits

Remuneration

Fringes Embrance

Short-term Disability

Social Security

Accident Protection

Unrecognised Benefits

Maternity Leave

Statutory Benefits

Credit Union

Flexible Benefits

Gratuity

Legal Aid

Statutory Welfare


1. Distinguish between benefits and services.

2. What is a fringe benefit? Why is it necessary for employees?

3. What is disability? Describe the components of disability income continuation plans.

4. What do you mean by health and accident protection?

5. Give some common time-off with pay components.

6. Discuss about statutory welfare provision in India.

7. What are the advantages and disadvantages of flexible benefits? Describe.


(i) Time-off from Work Without Pay

(ii) The Contract Labour Act, 1970

(iii) Recreational Facilities

(iv) Insurance Benefits

(v) Pension

(vi) Provident Fund

9. Explain non-statutory welfare amenities.




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Human Resource Management David A. DeCenzo & Stephen P. Robbins, Personnel/Human Resource Management,Third edition, PHI/Pearson.




Unit-V

LESSON

16INDUSTRIAL RELATION

CONTENTS


16.1 Introduction

16.2 Trade Unions

16.3 Objectives of Trade Unions

16.3.1 Wages and Salaries

16.3.2 Working Conditions

16.3.3 Discipline

16.3.4 Personnel Policies

16.3.5 Welfare

16.3.6 Employee-employer Relations

16.3.7 Negotiating Machinery

16.3.8 Safeguarding Organisational Health and the Interest of the Industry

16.4 Functions of Trade Unions

16.4.1 Militant or Protective or Intra-mutual Functions

16.4.2 Fraternal or Extra-mural Functions

16.4.3 Political Functions

16.4.4 Social Functions

16.5 Union Structure

16.5.1 Craft Unions

16.5.2 Industrial Union

16.5.3 General Union

16.5.4 Federations

16.6 Growth of Trade Union Movement and Membership

16.6.1 Early Period

16.6.2 A Modest Beginning

16.7 All India Trade Union Congress

16.7.1 Period of Splits and Mergers

16.7.2 Indian National Trade Union Congress

16.7.3 Other Central Unions

16.8 Present Position

Contd...

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In this lesson we shall discuss about industrial relation. After going through this lessonyou will be able to:

(i) Discuss trade unions.

(ii) Analyse all India trade union congress.

16.1 INTRODUCTION

The term ‘industrial relations’ refers to relationships between management and labouror among employees and their organisations that characterise or grow out of employment.Theoretically speaking, there are two parties in the ‘employment’ relationship – labourand management. Both parties need to work in a spirit of cooperation, adjustment andaccommodation. In their own mutual interest certain rules for co-existence are formedand adhered to. Over the years, the State has also come to play a major role in industrialrelations – one, as an initiator of policies and the other, as an employer by setting up anextremely large public sector.

The term ‘industrial relations’ has been defined by different authors in different ways.Dale Yoder defined it as “a relationship between management and employees or amongemployees and their organisations, that characterise and grow out of employment”.

According to R A Lester, industrial relations “involve attempts to have workable solutionsbetween conflicting objectives and values, between incentive and economic security,between discipline and industrial democracy, between authority and freedom and betweenbargaining and cooperation”.

According to the ILO, “industrial relations deal with either the relationships between thestate and the employers and the workers’ organisation or the relation between theoccupational organisations themselves”. The ILO uses the expression to denote suchmatters as “freedom of association and the protection of the right to organise, theapplication of the principles of the right to organise, and the right of collective bargaining,collective agreements, concilitation and arbitration and machinery for cooperation betweenthe authorities and the occupational organisations at various levels of the economy.

16.2 TRADE UNIONS

A trade union is a formal association of workers that promotes and protects the interests ofits members through collective action. Under the Trade Union Act of 1926, the term isdefined as any combination, whether temporary or permanent, formed primarily for thepurpose of regulating the relations between workers and employers, or for imposingrestrictive conditions on the conduct of any trade or business and includes any federationof two or more unions. Let us examine the definition in parts:

16.9 Let us Sum Up


16.11Keywords



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Industrial Relationi. Trade union is an association either of employees or employers or of independentworkers.

ii. It is a relatively permanent formation of workers. It is not a temporary or casualcombination of workers. It is formed on a continuous basis.

iii. It is formed for securing certain economic (like better wages, better working andliving conditions) and social (such as educational, recreational, medical, respect forindividual) benefits to members. Collective strength offers a sort of insurance coverto members to fight against irrational, arbitrary and illegal actions of employers.Members can share their feelings, exchange notes and fight the employer quiteeffectively whenever he goes off the track

iv. It includes a federation of trade unions also.

v. It emphasises joint, coordinated action and collective bargaining.

16.3 OBJECTIVES OF TRADE UNIONS

The failure of an individual worker to seek solutions to problems, while discharging hisduties, personal as well as organisational, led workers to form a formal group which isidentified at present as trade union. Thus, the main objective of any trade union is toprotect the interest of workers/employees in the organisation. However, the workers’interest/welfare is a broad term in which various subjects - wages and salaries, workingconditions, working hours, transfers, promotions, recruitment and classification, training,discipline, leave and holidays, dearness allowance, bonus, incentives, quarters, sanitation,employee relations, mechanisation, facilities to unions, welfare, employee relations andthe like are included. Thus, a trade union is meant to conduct negotiations on behalf ofthe individual workers in respect of several items. However, trade unions specificallyconcentrate their attention to achieve the following objectives:

16.3.1 Wages and Salaries

The subject which drew the major attention of the trade unions is wages and salaries. Ofcourse, this item may be related to policy matters. However, differences may arise in theprocess of their implementation. In the case of unorganised sector the trade union playsa crucial role in bargaining the pay scales.

16.3.2 Working conditions

Trade unions with a view to safeguard the health of workers demands the managementto provide all the basic facilities such as, lighting and ventilation, sanitation, rest rooms,safety equipment while discharging hazardous duties, drinking water, refreshment,minimum working hours, leave and rest, holidays with pay, job satisfaction, social securitybenefits and other welfare measures.

16.3.3 Discipline

Trade unions not only conduct negotiations in respect of the items with which theirworking conditions may be improved but also protect the workers from the clutches ofmanagement whenever workers become the victims of management’s unilateral actsand disciplinary policies. This victimisation may take the form of penal transfers,suspensions, dismissals, etc. In such a situation the separated worker who is left in ahelpless condition may approach the trade union. Ultimately the problem may be broughtto the notice of management by the trade union and it explains about the injustice metedout to an individual worker and fights the management for justice. Thus, the victimisedworker may be protected by the trade union.

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Human Resource Management 16.3.4 Personnel policies

Trade unions may fight against improper implementation of personnel policies in respectof recruitment, selection, promotions, transfers, training, etc.

16.3.5 Welfare

As stated earlier, trade unions are meant for the welfare of workers. Trade union worksas a guide, consulting authority and cooperates in overcoming the personnel problems ofworkers. It may bring to the notice of management, through collective bargaining meetings,the difficulties of workers in respect of sanitation, hospitals, quarters, schools and collegesfor their children’s cultural and social problems.

16.3.6 Employee-employer relations

Harmonious relations between the employee and employer is a sine qua non for industrialpeace. A trade union always strives for achieving this objective. However, the bureaucraticattitude and unilateral thinking of management may lead to conflicts in the organisationwhich ultimately disrupt the relations between the workers and management. Tradeunion, being the representative of all the workers, may carry out continuous negotiationswith the management with a view to promoting industrial peace.

16.3.7 Negotiating Machinery

Negotiations include the proposals made by one party and the counter proposals of theother party. This process continues until the parties reach an agreement. Thus, negotiationsare based on ‘give and take’ principle. Trade union being a party for negotiations, protectsthe interests of workers through collective bargaining. Thus, the trade union works asthe negotiating machinery.

16.3.8 Safeguarding organisational health and the interest of the industry

Organisational health can be diagnosed by methods evolved for grievance redressal andtechniques adopted to reduce the rate of absenteeism and labour turnover and to improvethe employee relations. Trade unions by their effective working may achieve employeesatisfaction. Thus, trade unions help in reducing the rate of absenteeism, labour turnoverand developing systematic grievance settlement procedures leading to harmoniousindustrial relations. Trade unions can thus contribute to the improvements in level ofproduction and productivity, discipline and improve quality of work life.

16.4 FUNCTIONS OF TRADE UNIONS

The functions of trade unions can be divided into the following categories, viz:

16.4.1 Militant or protective or intra-mutual functions

These functions include protecting the workers’ interests, i.e., hike in wages, providingmore benefits, job security, etc., through collective bargaining and direct action such asstrikes, gheraos, etc.

16.4.2 Fraternal or extra-mural functions

These functions include providing financial and non-financial assistance to workers duringthe periods of strikes and lock outs, extension of medical facilities during slackness andcausalities, provision of education, recreation, recreational and housing facilities, provisionof social and religious benefits, etc.

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Industrial Relation16.4.3 Political functions

These functions include affiliating the union to a political party, helping the political partyin enrolling members, collecting donations, seeking the help of political parties during theperiods of strikes and lockouts.

16.4.4 Social functions

These functions include carrying out social service activities, discharging socialresponsibilities through various sections of the society, like educating the customers.

16.5 UNION STRUCTURE

Indian labour is represented by many different kinds of unions:

16.5.1 Craft unions

A craft union is one whose members do one type of work, often using specialised skillsand training. It is horizontal in character as its members belong to a single process orgroup of processes. A craft union enjoys strong bargaining power as its members possessspecialised skills that cannot be easily replaced in case of a strike.

16.5.2 Industrial union

An industrial union is one that includes many persons working in the same industry orcompany, regardless of jobs held. It is vertical in nature as it consists of all types ofworkers in an industry. An industrial union also enjoys strong bargaining strength as itconsists of both skilled and unskilled workers. The employer may find it easy to negotiatewith one union covering all workers rather than deal with a number of craft unions incase of a dispute.

16.5.3 General union

This type of union consists of workers employed in different industries and crafts withina particular city or region. In this case, all workers are equal and there is no distinctionbetween skilled and unskilled workers. There is convenience in negotiations as theemployer need not bargain with so many splintered groups. Workers, of course, becomepart of a huge crowd and the interests of an important group many not be representedproperly.

There could be plant level unions, in addition to the above, where all workers in a factoryor establishment join hands to protect their interests.

16.5.4 Federations

These are national level entitles to which plant level unions, craft unions, industrial unionsand general unions are affiliated. These are apex bodies, coordinating the affairs ofvarious unions in their fold.

16.6 GROWTH OF TRADE UNION MOVEMENT ANDMEMBERSHIP

Trade unions in India, as in most other countries, have been the natural outcome of themodern factory system. The development of trade unionism in India has a chequeredhistory and a stormy career.

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Human Resource Management 16.6.1 Early Period

Efforts towards organising the workers for their welfare were made, during the earlyperiod of industrial development by social workers, philanthropists and other religiousleaders mostly on humanitarian grounds. The first Factories Act, 1881, was passed onthe basis of the recommendations of the Bombay Factory Commission, 1875. Due to thelimitations of the Act, the workers in Bombay Textile Industry under the leadership of NM Lokhande demanded reduced of hours of work, weekly rest days, mid-day recessand compensation for injuries. Bombay Mill owners’ Association conceded the demandfor weekly holiday. Consequently, Lokhande established the first Workers’ Union inIndia in 1890 in the name of Bombay Millhands Association. A labour journal called“Dinabandu” was also published.

Some of the important unions established during the period are: Amalgamated society ofRailway Servants of India and Burma (1897), the Printers Union, Calcutta (1905) andthe Bombay Postal Union (1907), the Kamgar Hitavardhak Sabha (1910) and the SocialService League (1910). But these unions were treated as ad hoc bodies and could notserve the purpose of trade unions.

16.6.2 A Modest Beginning

The beginning of the Labour movement in the modern sense started after the outbreakof World War I in the country. Economic, political and social conditions of the dayinfluenced the growth of trade union movement in India. Establishment of InternationalLabour Organisation in 1919 helped the formation of trade unions in the country. MadrasLabour Union was formed on systematic lines in 1919. A number of trade unions wereestablished between 1919 and 1923. Categorywise unions like Spinners’ Union andWeavers’ Union came into existence in Ahmedabad under the inspiration of MahatmaGandhi. These unions were later federated into an industrial union known as AhmedabadTextile Labour Association. This union has been formed on systematic lines and hasbeen functioning on sound lines based on the Gandhian Philosophy of mutual trust,collaboration and non-violence.

16.7 ALL INDIA TRADE UNION CONGRESS

The most important year in the history of Indian Trade Union movement is 1920 whenthe All India Trade Union Congress (AITUC) was formed consequent upon the necessityof electing delegates for the International Labour Organisation (ILO). This is the firstAll India trade union in the country. The first meeting of the AITUC was held in October,1920 at Bombay (now Mumbai) under the presidentship of Lala Lajpat Rai. The formationof AITUC led to the establishment of All India Railwaymen’s Federation (AIRF) in1922. Many company Railway Unions were affiliated to it. Signs of militant tendencyand revolutionary ideas were apparent during this period.

16.7.1 Period of splits and mergers

The splinter group of AITUC formed All India Trade Union Federation (AITUF) in1929. Another split by the communists in 1931 led to the formation of All India RedTrade Union Congress. Thus, splits were more common during the period. However,efforts were made by the Railway Federation to bring unity within the AITUC. Theseefforts did bear fruit and All India Red Trade Union Congress was dissolved. Added tothis, All India Trade Union Federation also merged with AITUC. The unified AITUC’sconvention was held in 1940 in Nagpur. But the unity did not last long. The World War IIbrought splits in the AITUC. There were two groups in the AITUC, one supporting thewar with the other opposing it. The supporting group established its own centralorganisation called the Indian Federation of Labour. A further split took place in 1947,when the top leaders of the Indian National Congress formed another central organisation.

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Industrial Relation16.7.2 Indian national trade union congress

The efforts of Indian National Congress resulted in the establishment of Indian NationalTrade Union Congress (INTUC) by bringing about a split in the AITUC. INTUC startedgaining membership right from the beginning.

16.7.3 Other central unions

Socialists separated from AITUC had formed Hind Mazdoor Sabha (HMS) in 1948.The Indian Federation of Labour merged with the HMS. Radicals formed another unionunder the name of United Trade Union Congress in 1949. Thus, the trade union movementin the country was split into four distinct central unions during the short span of threeyears, from 1946 to 1949.

Some other central unions were also formed. They were Bharatiya Mazdoor Sangh(BMS) in 1955, the Hind Mazdoor Panchayat (HMP) in 1965 and Centre of IndianTrade Unions (CITU) in 1970. Thus, splinter group of INTUC formed Union TradeUnion Congress - the split in the Congress party in 1969 resulted in the split in INTUCand led to the formation of National Labour Organisation (NLO).

16.8 PRESENT POSITION

i. There are over 7,000 trade unions (submitting returns) in the country, and morethan 70 federations and confederations registered under the Trade Unions Act,1926. The degree of unionism is fairly high in organised industrial sector. It isnegligible in the agricultural and unorganised sectors.

ii. Though the number of unions has greatly increased in the last four decades, theunion membership per union has not kept pace. The National Commission on labourhas stated that only 131 unions had a membership of over 5,000. More than 70% ofthe unions had a membership of below 500. Over the years the average membershipfigures per union have fallen steadily from about 1387 in 1943 to 750 in 2000.Unions with a membership of over 2000 constitute roughly 4 per cent of the totalunions in the country.

iii. There is a high degree of unionisation (varying from 30% to over 70%) in coal,cotton, textiles, iron and steel, railways, cement, banking, insurance, ports and docksand tobacco sector. White collar unions have also increased significantly coveringofficers, senior executives, managers, civil servants, self employed professions likedoctors, lawyers, traders, etc., for safeguarding their interests.

iv. Most of the unions in India are fairly small in size. Post-liberalisation, membershipfigures have become somewhat pathetic.

Box 16.1: Trade Unions and their Membership

Source: Pocket Book of Labour Statistics, 2003-2004.

The 12 million unionised workers in the country are scattered among 12 central tradeunion organisations (as against one or two in UK, Japan, USA) with the BMS, INTUC,AITUC, CITU and HMS among the top five. The membership figures of each suchunion, naturally are not very impressive – AITUC had 9.24 lakh; INTUC has 27.06 lakh;HMS had 14.77 lakh and UTUC 8.3 lakh (Lenin group); and CITU had 17.98 lakh

Details 1998 1999 2000

1. No. of registered workers’ unions 61,199 64,040 65,286

2. Number submitting returns 7,291 8,061 7,224

3. Membership of unions submitting returns (’000)

7,229 6,394 5,417

4. Average membership per union 991 793 749

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Human Resource Management members in 1995. The membership figures have not changed significantly over the years.Just about 10% of the total workforce in India is unionised. The last membership surveywas carried out in 1989, the results came in 1992 suggesting the supremacy of BMS asthe union having maximum union members in the country – about 31 lakh.

A lot of benefits in the form of representation in various government committees, PSUboards, wage negotiation committees would be available to the BMS as a result of thissurvey. In the 1980 survey INTUC emerged as the topper among the national tradeunions in the country. The survey results of 1989 had been leaked to the press in 1992,but not officially endorsed by the government till recently. What about the figures ofmembers claimed by INTUC and others after 1989 survey ? A meeting held on 2.10.1994did not resolve the conflicting claims of RSS- affiliated BMS and Congress supportedINTUC and the stalemate continues!

16.9 LET US SUM UP

The term ‘industrial relations’ refers to relationships between management and labouror among employees and their organisations that characterise or grow out of employment.Theoretically speaking, there are two parties in the ‘employment’ relationship – labourand management. A trade union is a formal association of workers that promotes andprotects the interests of its members through collective action. A trade union alwaysstrives for achieving better objective. Organisational health can be diagnosed by methodsevolved for grievance redressal and techniques adopted to reduce the rate of absenteeismand labour turnover and to improve the employee relations. Trade unions in India, as inmost other countries, have been the natural outcome of the modern factory system. Thedevelopment of trade unionism in India has a chequered history and a stormy career.There is a high degree of unionisation (varying from 30% to over 70%) in coal, cotton,textiles, iron and steel, railways, cement, banking, insurance, ports and docks and tobaccosector.


(i) Outline the traditional and non-traditional tactics to be followed by a union in orderto increase its membership ranks.

(ii) It is often felt that ‘goodpay’ and ‘good management’ are the keys to successfulunion avoidance. Spell out the kind of policies and practices companies shoulddevelop if they want to keep their workers from unionising.

16.11 KEYWORDS

Industrial Relation

Trade Unions

Negotiating Machinery

Craft Unions

Federations


1. What are Trade Unions? Give the objectives of Trade Unions.

2. Explain the various functions of Trade Unions.

3. Give a brief description on present position Trade Unions.

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Industrial Relation16.13 SUGGESTED READINGS







LESSON

17COLLECTIVE BARGAINING

CONTENTS

17.0 Aims and objectives

17.1 Introduction

17.2 Features of Collective Bargaining

17.2.1 Collective

17.2.2 Strength

17.2.3 Flexible

17.2.4 Voluntary

17.2.5 Continuous

17.2.6 Dynamic

17.2.7 Power Relationship

17.2.8 Representation

17.2.9 Bipartite Process

17.2.10 Complex

17.3 Objectives of Collective Bargaining

17.4 Bargainable Issues

17.5 Types of Bargaining

17.5.1 Conjunctive/Distributive/ Bargaining

17.5.2 Cooperative Bargaining

17.5.3 Productivity Bargaining

17.5.4 Composite Bargaining

17.6 The Process of Collective Bargaining

17.6.1 Identification of the Problem

17.6.2 Collection of Data

17.6.3 Selection of Negotiators

17.6.4 Climate of Negotiations

17.6.5 Bargaining Strategy and Tactics

17.7 Collective Bargaining in India

17.8 Future of Trade Unionism

17.9 Discipline Administration

17.9.1 Positive Discipline Approach

17.9.2 Progressive Discipline Approach Contd....

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Collective Bargaining


In this lesson we shall discuss about collective bargaining. After going through this lessonyou will be able to:

(i) Discuss feature, type and objective of collective bargaining.

(ii) Analyse future of trade unionism and discipline administration.

17.1 INTRODUCTION

Bargaining is the process of cajoling, debating, discussing and even threatening so as toarrive at an amicable agreement for those being represented. Collective bargaining is aprocedure by which the terms and conditions of workers are regulated by agreementsbetween their bargaining agents and employers. The basic objective of collectivebargaining is to arrive at an agreement on wages and other conditions of employment.Both the employer and the employees may begin the process with divergent views butultimately try to reach a compromise, making some sacrifices. As soon as a compromiseis reached, the terms of agreement are put into operation.

The underlying idea of collective bargaining is that the employer and employee relationsshould not be decided unilaterally or with the intervention of any third party. Bothparties must reconcile their differences voluntarily through negotiations, yielding someconcessions and making sacrifices in the process. Both should bargain from a positionof strength; there should be no attempt to exploit the weaknesses or vulnerability of oneparty. With the growth of union movement all over the globe and the emergence ofemployers’ associations, the collective bargaining process has undergone significantchanges. Both parties have, more or less, realised the importance of peaceful co-existencefor their mutual benefit and continued progress.

17.2 FEATURES OF COLLECTIVE BARGAINING

Some of the important features of collective bargaining may be listed thus:

17.2.1 Collective

It is collective in two ways. One is that all the workers collectively bargain for theircommon interests and benefits. The other is that workers and management jointly arriveat an amicable solution through negotiations.

17.10The Red Hot Stove Rule

17.10.1 Burns Immediately

17.10.2 Provides Warning

17.10.3 Gives Consistent Punishment

17.10.4 Burns Impersonally

17.11Judicial Approach to Discipline in India

17.11.1 Disciplinary Action

17.12Let us Sum Up

17.13Lesson-end Activity

17.14Keywords



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Human Resource Management 17.2.2 Strength

Across the table, both parties bargain from a position of equal strength. In collectivebargaining, the bargaining strength of both parties is equal. It is industrial democracy atwork.

17.2.3 Flexible

It is a group action where representatives of workers and management expend energiesin order to arrive at a consensus. It has sufficient flexibility, since no party can afford tobe inflexible and rigid in such situations. The unique feature of collective bargaining isthat usually the parties concerned start negotiations with entirely divergent views butfinally reach a middle point acceptable to both. It is therefore not a one-way street but agive and take process.

17.2.4 Voluntary

Both workers and management come to the negotiating table voluntarily in order to havea meaningful dialogue on various troubling issues. They try to probe each other’s viewsthoroughly before arriving at an acceptable solution. The implementation of the agreementreached is also a voluntary process.

17.2.5 Continuous

Collective bargaining is a continuous process. It does not commence with negotiationsand end with an agreement. The agreement is only a beginning of collective bargaining.It is a continuous process which includes implementation of the agreement and alsofurther negotiations.

17.2.6 Dynamic

Collective bargaining is a dynamic process because the way agreements are arrived at,the way they are implemented, the mental make-up of parties involved keeps changing.As a result, the concept itself changes, grows and expands over time.

17.2.7 Power relationship

Workers want to gain the maximum from management, and management wants to extractthe maximum from workers by offering as little as possible. To reach a consensus, bothhave to retreat from such positions and accept less than what is asked for and give morethan what is on offer. By doing so management tries to retain its control on workplacematters and unions attempt to strengthen their hold over workers without any seriousdilution of their powers.

17.2.8 Representation

The chief participants in collective bargaining do not act for themselves. They representthe claims of labour and management while trying to reach an agreement. In collectivebargaining the employer does not deal directly with workers. He carries out negotiationswith representatives of unions who are authorised to bargain with the employer onwork-related matters.

17.2.9 Bipartite process

The employers and the employees negotiate the issues directly, face to face across thetable. There is no third party intervention.

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Collective Bargaining17.2.10 Complex

Collective bargaining is a complex process involving a number of procedures, techniquesand tools: preparation for negotiations, timing, selection of negotiators, agenda, tediousnegotiations, make up of agreement, ratification, enforcement etc.

17.3 OBJECTIVES OF COLLECTIVE BARGAINING

The main objectives of collective bargaining are given below:

i. To settle disputes/conflicts relating to wages and working conditions.

ii. To protect the interests of workers through collective action.

iii. To resolve the differences between workers and management through voluntarynegotiations and arrive at a consensus.

iv. To avoid third party intervention in matters relating to employment.

17.4 BARGAINABLE ISSUES

Which are the issues that could be bargained across the table? Practically speaking anyissue that has relevance to management and workers becomes the subject matter ofbargaining. However, in certain specific cases both management and workers arereluctant to yield ground. Traditionally, management is not willing to negotiate workmethods, arguing that it is management’s exclusive right to decide how the work is to bedone. Likewise unions do not want negotiations on production norms and disciplinarymatters, because any agreement in this regard would put limits on their freedom. Howeverover the years, the nature and content of collective bargaining has changed quitedramatically, thanks to the pulls and pressures exercised by the bargaining parties.

Traditionally, wages and working conditions have been the primary focus areas of collectivebargaining. However, in recent times, the process of bargaining has extended to almostany area that comes under the employer-employee relations, covering a large territory.(See Box 17.1)

17.5 TYPES OF BARGAINING

Four distinct types of bargaining have evolved over time, namely conjunctive, cooperative,productivity and composite bargaining. These are discussed below.

17.5.1 Conjunctive/distributive/bargaining

The parties try to maximise their respective gains. They try to settle economic issuessuch as wages, benefits, bonus, etc., through a zero-sum game (where my gain is yourloss and your gain is my loss). Unions negotiate for maximum wages. Managementwants to yield as little as possible – while getting things done through workers.

17.5.2 Cooperative bargaining

When companies are hit by recession, they cannot offer the kind of wages and benefitsdemanded by workers. At the same time they cannot survive without the latter’s support.Both parties realise the importance of surviving in such difficult times and are willing tonegotiate the terms of employment in a flexible way. Labour may accept a cut in wagesin return for job security and higher wages when things improve. Management agrees tomodernise and bring in new technology and invest in marketing efforts in a phasedmanner. In India, companies like TELCO, Ashok Leyland resorted to cooperativebargaining in recent times with a view to survive the recessionary trends in the automobilesector.

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Human Resource Management Box 17.1: The Substance of Bargaining

17.5.3 Productivity bargaining

In this method, workers’ wages and benefits are linked to productivity. A standardproductivity index is finalised through negotiations initially. Workers do not have to performat exceptionally high levels to beat the index. If they are able to exceed the standardproductivity norms workers will get substantial benefits. Management gains control overworkplace relations and is able to tighten the norms still further in future negotiations.Without such productivity bargaining agreements, workers may not realise the importanceof raising productivity for organisational survival and growth. Backed up by powerfulunions, they may fail to read the danger signals from the market and respond quickly.

17.5.4 Composite bargaining

It is alleged by workers that productivity bargaining agreements have increased theirworkload. Rationalisation, introduction of high technology, and tight productivity normshave made the life of a worker somewhat uneasy. All these steps have started hitting theunions and workers below the belt. As an answer to such problems, labour has come tofavour composite bargaining. In this method, labour bargains for wages as usual butgoes a step further demanding equity in matters relating to work norms, employmentlevels, manning standards, environmental hazards, sub-contracting clauses, etc. Whenunions negotiate manning standards they ensure the workload of workers does notincrease, this helps to maintain the status quo as far as employment level is concerned.By negotiating sub-contracting clauses, unions prevent management from farming outbusiness to ancillaries. If permitted, such an action may result in lower employment insome other plant diluting the bargaining powers of unions substantially. Workers are nolonger interested in monetary aspects to the exclusion of work related matters. There isno doubt that wages, bonus and other monetary aspects continue to occupy the centre-stage in bargaining sessions. But there is a definite shift towards composite bargaining.Without such a proactive stand, workers may not be able to withstand the forces ofliberalisation, automation, farming out business to outsiders and survive. Through compositebargaining unions are able to prevent the dilution of their powers and ensure justice toworkers by putting certain limits on the freedom of employers. For the employer this is alesser evil when compared to strikes and lockouts. Apart from periodic wage hikes andday-to-day tussles over productivity norms and other related issues there is at least nodanger of workers striking work every now and then. Of course, even this situation maynot continue for long. In companies like SAIL, Philips, Bata, GKW and even TISCO,workforce reductions have to come if they have to survive in a high-tech environment.The compulsions of a free market economy cannot be put aside just for the sake ofmaintaining the labour force. It is small wonder despite serious warnings from unions,companies in the recession-hit automobile sector (Hindustan Motors, Premier Automobiles,Maruti, TVS Suzuki, Hero Honda) have either reduced the work force or cut down theirbenefits.

1. Wages and working conditions2. Work norms3. Incentive payments4. Job security5. Changes in technology6. Work tools, techniques and practices7. Staff transfers and promotions8. Grievances9. Disciplinary matters10. Health and safety11. Insurance and benefits12. Union recognition13. Union activities/responsibilities14. Management rights

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Collective Bargaining17.6 THE PROCESS OF COLLECTIVE BARGAINING

The following steps are involved in the collective bargainings process:

17.6.1 Identification of the problem

The nature of the problem influences whole process. Whether the problem is veryimportant that is to be discussed immediately or it can be postponed for some otherconvenient time, whether the problem is a minor one so that it can be solved with theother party’s acceptance on its presentation and does not need to involve long process ofcollective bargaining process, etc. It also influences selection of representatives, theirsize, period of negotiations and period of agreement that is reached ultimately. As suchit is important for both the parties to be clear about the problem before entering into thenegotiations.

17.6.2 Collection of data

Both labour and management initially spend considerable time collecting relevant datarelating to grievances, disciplinary actions, transfers and promotions, lay-offs, overtime,former agreements covering wages, benefits, working conditions (internal sources) andcurrent economic forecasts, cost of living trends, wage rates in a region across variousoccupations, competitive terms offered by rivals in the field etc.

17.6.3 Selection of negotiators

The success of collective bargaining depends on the skills and knowledge of thenegotiators. Considerable time should, therefore, be devoted to the selection of negotiatorswith requisite qualifications. Generally speaking, effective negotiators should have aworking knowledge of trade unions principles, operations, economics, psychology, andlabour laws. They should be good judges of human nature and be able to get along withpeople easily. They must know when to listen, when to speak, when to stand their ground,when to concede, when to horse-trade, and when to make counter proposals. Timing isimportant. Effective speaking and debating skills are essential.

17.6.4 Climate of negotiations

Both parties must decide an appropriate time and set a proper climate for initialnegotiations. At this stage the parties must determine whether the tone of the negotiationsis going to be one of mutual trust with 'nothing up our sleeves', one of suspicion with lotof distortion and misrepresentation, or one of hostility with a lot of name calling andaccusations.

17.6.5 Bargaining strategy and tactics

The strategy is the plan and the policies that will be pursued at the bargaining table.Tactics are the specific action plans taken in the bargaining sessions. It is important tospell out the strategy and tactics in black and white, broadly covering the followingaspects:

l Likely union proposals and management responses to them.

l A listing of management demands, limits of concessions and anticipated unionresponses.

l Development of a database to support proposals advanced by management and tocounteract union demands.

l A contingency operating plan if things do not move on track.

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Human Resource Management Box 17.2: Popular Bargaining Tactics (Sloane and Whitney)

1. Conflict-based: Each party uncompromising, takes a hard line, and resists any overtures forcompromise or agreement. Typically, what happens is that one party mirrors the other party'sactions.

2. Armed truce: Each party views the other as an adversary. Although they are adversaries, it isrecognised that an agreement must be worked out under the guidelines specified by the law. Infact, the law is followed to the letter to reach agreement.

3. Power bargaining: Each party accepts the other party with the knowledge that a balance ofpower exists. It would be nonproductive to pursue a strategy of trying to eliminate the otherparty in the relationship.

4. Accommodation: Both parties adjust to each other. Positive compromises, flexibility, andtolerance are used, rather than emotion and raw power. It is claimed that most managers andunion leaders have engaged in accommodation for the bulk of union-management bargainingissues.

5. Cooperation: Each side accepts the other as a full partner. This means that management and theunion work together not only on everyday matters but in such difficult areas as technologicalchange, improvements is quality of work life, and business decision making.

Generally each side tries to find how far the other side is willing to go in terms ofconcessions, and the minimum levels each is willing to accept. “Take it or leaveit” kind of extreme positions would spoil the show and hence parties should avoidtaking such a rigid and inflexible stand initially. Successful negotiations, after all,are contingent upon each side remaining flexible. Each party should be willing toconcede upto a certain extent depending on one’s own compulsions and pressures,with a view to win over the other party. This is popularly known as “bargainingzone” which is the area bounded by the limits within which the union and employeesare willing to concede. If neither party is willing to concede a little bit, negotiationsreach a deadlock or impasse, which can eventually result in a strike on the part ofthe union or a lockout on the part of management.

Box 17.3: Bargaining Limits

Reed Richardson has the following advice for bargainers:

1. Be sure to set clear objectives for every bargaining item, and be sure you understand the reasonfor each.

2. Do not hurry.

3. When in doubt, caucus with your associates.

4. Be well prepared with firm data supporting your position.

5. Always strive to keep some flexibility in your position.

6. Don't concern yourself just with what the other party says and does; find out why.

7. Respect the importance for face saving for the other party.

8. Be alert to the real intentions of the other party-not only for goals, but also for priorities.

9. Be a good listener.

10. Build a reputation for being fair but firm.

11. Learn to control your emotions and use them as a tool.

12. As you make each bargaining move, be sure you know its relationship to all other moves.

13. Measure each move against your objectives.

14. Pay close attention to the wording of every clause negotiated; they are often a source ofgrievances.

15. Remember that collective bargaining is a compromise process; There is no such thing as havingall the pie.

16. Try to understand people and their personalities.

17. Consider the impact of present negotiations on those in future years.

Reed Richardson

Impasse, thus, is a collective bargaining situation when the parties are not able toovercome their differences, usually because one party is demanding more than the

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Collective Bargainingother will offer. One way to avoid impasse is to postponement of difficult issues toa later stage and take up easier ones first with a view to have a smoother passageinitially. Another way to avoid breakdowns is for each side to be prepared to offerpropositions and to accept alternative solutions to some of the more controversialissues. Skilled negotiators as mentioned by Richardson, take charge of the issuethrough logical presentations, good manners and cool behaviour.

l Formalising the agreement: When a solution comes through what is popularlyknown as 'good faith bargaining' (Both parties are making every reasonableeffort to arrive at agreement, proposals are being matched with counter proposals),a formal document must be prepared expressing everything in a simple, clear andconcise form. After this, both parties must sign the agreement and abide by itsterms and conditions during the entire term of the contract.

Box 17.4: Content of a Labour Agreement

Purpose and intent of the parties Vacations

Scope of the agreement Seniority

Management Safety and health

Responsibilities of the parties Military service

Union membership and checkoff Severance allowance

Adjustment of grievance Savings and vacation plan

Arbitration Supplemental benefits program

Suspension and discharge cases Prior agreements

Rates of pay Termination date

Hours of work

Overtime and holidays

l Enforcing the agreement: Collective bargaining does not come to an end withthe signing of the agreement. For the agreement to be meaningful and effective,both parties must adhere to the conditions agreed upon and implement every thingscrupulously.

17.7 COLLECTIVE BARGAINING IN INDIA

The story of collective bargaining is the story of the rise and growth of trade unionismitself. It had its roots in Great Britain and developed in response to conditions created bythe Industrial Revolution. In early part of 18th century when trade unions came intoexistence, the idea of bargaining collectively gained strength. Initially the negotiationswere carried out at plant level. By early 1900, industry and national level agreementswere quite common. Slowly but steadily the idea spread to France, Germany, USA.After a century of rapid growth, collective bargaining has more or less, become thegospel of industrial relations. It is being increasingly viewed as a social invention that hasinstitutionalised industrial conflict. In other words it is through the process of collectivebargaining that organisations have learnt to cope with industrial conflict.

In India trade unions have come to occupy the centre stage only after 1900. In 1918,Gandhiji, as the leader of the Ahmedabad Textile workers advocated the resolution ofconflict through collective bargaining agreements. For another 10 years, this method ofsetting disputes did not gain popularity. The legal steps taken by the government after theSecond World War revived interest in the subject once again. The legislative measuresincluded the setting up of a machinery for negotiations, conciliation and arbitration. Basicconflicting issues concurring wages and conditions of employment were sought to beresolved through voluntary means.

After Independence, with the spread of trade unionism, collective bargaining agreementshave become popular. A large majority of disputes were resolved through this mechanism.

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Human Resource Management Most agreements were concluded at the plant level. In centres like Mumbai, Ahmedabadindustry level agreements were quite common – thanks to the legal blessings extendedby the respective State Acts. The agreements were found in industries such as chemicals,petroleum, tea, coal, oil, aluminum, etc. In ports and docks, banking and insurance, collectiveagreements at the national level were also arrived at.

17.8 FUTURE OF TRADE UNIONISM

Public sympathy and unqualified support was there for the asking for trade unions andlabour leaders when India gained Independence. They were treated as living legendsand welcomed into corporate circles and political forums openly. Nationalisation ofimportant services (railways, banking, insurance, power, posts and telegraph, aviation,docks and ports etc.) and core sector activities have paid dividends initially. Thanks toMS Swaminathan, the agricultural sector flourished during 60's and 70's. The industrialsector, unfortunately, failed to deliver the goods on all fronts. To cite an example, absenceof competition has led to the government-owned insurance companies becoming slothful,unproductive and expensive to the customers (premium on life insurance is nearly 40 percent more in India than in any developed country because the Life Insurance Corporationhas to compulsorily invest in government securities). The entire decade of the 1970swas lost to empty slogans like 'Garibi Hatao'. The socialist leanings of Mrs. Gandhi didnot take the nation to 'commanding heights'. Absence of competition, administrativecontrols, licensing restrictions, pro-labour policies, were the hallmarks of 1970s and 1980s.Owners were inward looking, focusing more on lobbying than on achieving productionefficiency through investments in R & D, technology upgradation and total qualitymanagement. Assured jobs, weak employers, pro-labour government policies andcollective strength of numbers have encouraged labour to be vociferous and demanding.Ever apprehensive of rubbing the unions the wrong way, governments-especially whenelections are round the corner – preferred the velvet glove to the iron fist when dealingwith unions. Secure jobs, high wages, absence of accountability and contempt for authorityis what the workers of a public sector undertaking have come to personify. Theseemployees (10% of Organised labour harming the interests of the remaining 90%) haveheld the country to ransom for far too long. They were, all along, inward-looking, resistantto change and always talked about their rights and not their duties.

The process of socio-political and economic churning that was forced upon the countryin the early 90's – thanks to Mandal, Mandir and Manmohan (Economic Liberalisation)– has engulfed virtually every aspect of the nation's life. The Labour Unions during thisperiod failed to catch up with the times. Their refusal to refocus their aims, or evenacknowledge the need to change, has led to their irrelevance and alienation from thosevery sections of the Indian society whose support helped them grow.

17.9 DISCIPLINE ADMINISTRATION

There are two ways of dealing with employees who do not obey rules, indulge in actsthat are not permitted and tend to fly off the hook at the slightest provocation: i.e., positivediscipline approach and the progressive discipline approach. The best discipline is clearlyself discipline, when most people understand what is required at work.

17.9.1 Positive Discipline Approach

This approach builds on the philosophy that violations are actions that usually can becorrected without penalty. In this approach, the focus is on fact-finding and guidance to

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Collective Bargainingencourage desirable behaviours instead of using penalties to discourage undesirablebehaviours. There are three steps to positive discipline. The first is a conference betweenthe employee and the supervisor. The purpose of this meeting is to arrive at a solution tothe problem through discussion, with oral assurance by the employee to improve hisperformance. If improvement is not made after this first step, the supervisor holds asecond conference with the employee to find why the solution agreed to in the firstmeeting did not produce results. At this stage a written reminder is handed over to theemployee. This document details an agreed solution with an affirmation that improvementis the responsibility of the employee and a condition of continued employment. Whenboth meetings fail to produce the desired results, the employees is given a paid leave forone day to decide his future in the organisation. The employee is expected to come backthe next day with a decision to make a total commitment to improve performance or toquit the organisation. These three stages are depicted in Box 17.5:

Box 17.5: Steps in Positive Discipline

Step 1: An Oral Reminder Notice here that the word warning is removed. The oralreminder, supported by written documentation, serves asthe initial formal phase of the process to identify to theemployee what work problems he or she is having. Thisreminder is designed to identify what is causing the problemand attempts to correct it before it becomes larger.

Step 2: A Written Reminder If the oral reminder was unsuccessful, a more formalisedversion is implemented. This written reminder once againreinforces what the problems are and what corrective actionis necessary. Furthermore, specific time tables that theemployee must accept and abide by, and the consequencesfor failing to comply, are often included.

Step 3: A Decision-making Leave Here, employees are given a decision-making leave—time offfrom work, usually with pay—to think about what they aredoing and whether or not they desire to continue work withthe company: This “deciding day” is designed to allow theemployee an opportunity to make a choice—correct thebehaviour, or face separation from the company.

17.9.2 Progressive Discipline Approach

In this approach discipline is imposed in a progressive manner, giving an opportunity tothe employee to correct his or her misconduct voluntarily. The technique aims at nippingthe problem in the bud, using only enough corrective action to remedy the shortcoming.The sequence and severity of the disciplinary action vary with the type of offence andthe circumstances surrounding it. Progressive discipline is quite similar to positive disciplinein that it too uses a service of steps that increase in imaginary and security until the finalsteps. However, positive discipline replaces the punishment used in progressive disciplinewith counselling sessions between employee and supervisor.

The concept of progressive discipline states that penalties must be appropriate to theviolation. If inappropriate behaviour is minor in nature and has not previously occurred,an oral warning may be sufficient. If the violation requires a written warning, it must bedone according to a procedure. After written warnings, if the conduct of the employee isstill not along desired lines, serious punitive steps could be initiated. Major violations suchas hitting a supervisor may justify the termination of an employee immediately.

In order to assist a manager to recognise the proper level of disciplinary action, somefirms have formalised the procedure. One approach in the establishment of progressivedisciplinary action is shown in Figure 17.1.

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Figure 17.1: The Progressive Discipline Approach

17.10 THE RED HOT STOVE RULE

Without the continual support of subordinates, no manager can get things done. But,disciplinary action against a delinquent employee is painful and generates resentment onhis part. Hence, a question arises as to how to impose discipline without generatingresentment? This is possible through what Douglas McGregor called the “Red Hot StoveRule”, which draws an analogy between touching a hot stove and undergoing discipline.

According to the Red Hot Stove rule, disciplinary action should have the followingconsequences:

17.10.1 Burns immediately

If disciplinary action is to be taken, it must occur immediately so the individual willunderstand the reason for it. With the passage of time, people have the tendency toconvince themselves that they are not at fault.

17.10.2 Provides warning

It is very important to provide advance warning that punishment will follow unacceptablebehaviour. As you move closer to a hot stove, you are warned by its heat that you will beburned if you touch it.

17.10.3 Gives consistent punishment

Disciplinary action should also be consistent in that everyone who performs the sameact will be punished accordingly. As with a hot stove, each person who touches it isburned the same.

17.10.4 Burns impersonally

Disciplinary action should be impersonal. There are no favourites when this approach isfollowed.

Improper behaviour

Does this violation No No disciplinarywarrant disciplinary action

action?

Ye s

Does this violation No Oralwarrant more than warningan oral warning?

Ye s

Does this violation No Writtenwarrant more than warninga written warning?

Ye s

Does this violation Nowarrant more than Suspension

a suspension?

Ye s

Termination

225

Collective Bargaining17.11 JUDICIAL APPROACH TO DISCIPLINE IN INDIA

The Industrial Employment (Standing orders) Act was passed in 1946 with a view toimprove the industrial relations climate. The Act requires that all establishments mustdefine the service rules and prepare standing orders. The term ‘Standing orders’ refersto the rules and regulations which govern the conditions of employment of workers.They indicate the duties and responsibilities on the part of both the employer and theemployees. The standing orders contain rules relating to: classification of employees,working hours, holidays, shift working, attendance, leave, suspension, termination, stoppageof work, redressal of grievances against unfair treatment, etc. Thus, standing ordersspecify the terms and conditions which regulate the employee-employer relationshipwithin a unit. Any violation or infringement of these terms and conditions may lead tomisconduct or indiscipline.

Box 17.6: Major Acts of Misconduct

l does not discharge his duties properly, remains absent without leave

l indulges in acts which are unsafe for the employer

l is grossly immoral, dishonest

l is insulting, abusive and disturbs the peace of others

l in unfaithful, corrupt, disloyal

l indulges in theft, fraud, bribery

l does not obey orders

l resorts to illegal strike

l causes wilful damage to property, etc.

The Industrial Disputes Act 1947 (as amended in 1982) prescribes an elaborate procedurefor dischanging a delinquent employee even on grounds of serious misconduct. Likewise,the Payment of Wages Act places restrictions on the imposition of fines on an accusedemployee. The legal position is quite clear. The employee should get a chance to explainthe grounds under which he violated the standing orders. There must be a proper enquiryas per the principles of natural justice before resorting to punishment.

17.11.1 Disciplinary Action

Though there is no rigid and specific procedure for taking a disciplinary action, thedisciplinary procedure followed in Indian industries usually consists of the following steps:

i. Issuing a letter of charge: When an employee commits an act of misconduct thatrequires disciplinary action, the employee concerned should be issued a chargesheet. Charges of misconduct or indiscipline should be clearly and precisely statedin the charge sheet. The charge sheet should also ask for an explanation for thesaid delinquent act and the employee should be given sufficient time for answeringthis.

ii. Consideration of explanation: On getting the answer for the letter of chargeserved, the explanation furnished be considered and if it is satisfactory, no disciplinaryaction need be taken. On the contrary when the management is not satisfied withthe employee’s explanation there is a need for serving a show-cause notice.

iii. Show-cause notice: Show-cause notice is issued by the manager when he believesthat there is sufficient prima facie evidence of employee’s misconduct. However,this gives the employee another chance to account for his misconduct and rebutthe charges made against him. Enquiry should also be initiated by first serving hima notice of enquiry indicating clearly the name of the enquiring officer, time, dateand place of enquiry, etc.

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Human Resource Management iv. Holding of a full-fledged enquiry: This must be in conformity with the principleof natural justice, that is, the employee concerned must be given an opportunity, ofbeing heard. When the process of enquiry is over and the findings of the same arerecorded, the Enquiry Officer should suggest the nature of disciplinary action to betaken.

v. Making a final order of punishment: Disciplinary action is to be taken when themisconduct of the employee is proved. While deciding the nature of disciplinaryaction, the employee’s previous record, precedents, effects of disciplinary actionon other employees, etc., have to be considered.

When the employee feels that the enquiry conducted was not proper and the actiontaken is unjustified, he must be given a chance to make an appeal.

vi. Follow up: After taking the disciplinary action, a proper follow up action has to betaken and the consequences of the implementation of disciplinary action should benoted and taken care of.

17.12 LET US SUM UP

Bargaining is the process of cajoling, debating, discussing and even threatening so as toarrive at an amicable agreement for those being represented. Traditionally, wages andworking conditions have been the primary focus areas of collective bargaining. Whencompanies are hit by recession, they cannot offer the kind of wages and benefits demandedby workers. At the same time they cannot survive without the latter’s support. Thesuccess of collective bargaining depends on the skills and knowledge of the negotiators.In India trade unions have come to occupy the centre stage only after 1900. In 1918,Gandhiji, as the leader of the Ahmedabad Textile workers advocated the resolution ofconflict through collective bargaining agreements.


Outline the major collective bargaining issues of companies in India today. What do youforesee as the major issues of the future? Explain your response.

17.14 KEYWORDS

Collective Bargaining

Cooperative Bargaining

Composite Bargaining

Discipline Approach

Judicial Approach


1. What is Bargaining? Name the various types of Bargaining.

2. What is collective Bargaining? Explain the features of Collective Bargaining.

3. Describe different steps of Collective Bargainings.

227

Collective Bargaining17.16 SUGGESTED READINGS







LESSON

18GRIEVANCES HANDLING

CONTENTS


18.1 Introduction

18.2 Features

18.3 Forms of Grievances

18.3.1 Factual

18.3.2 Imaginary

18.3.3 Disguised

18.4 Causes

18.4.1 Economic

18.4.2 Work Environment

18.4.3 Supervision

18.4.4 Work group

18.4.5 Miscellaneous

18.5 Advantages of having a Grievance Handling Procedure

18.6 Guidelines for Handling Grievances

18.7 Managing Dismissals and Separation

18.8 Separation

18.8.1 Resignation

18.8.2 Retirement

18.8.3 Lay off

18.8.4 Retrenchment

18.8.5 Discharge and Dismissal

18.9 Let us Sum Up


18.11Keywords



229

Grievances Handling18.0 AIMS AND OBJECTIVES

In this lesson we shall discuss about grievances handling. After going through this lessonyou will be able to:

(i) Analyse features, causes and form of grievances and its advantages and guidelines.

(ii) Discuss managing dismissals and separation.

18.1 INTRODUCTION

Every employee has certain expectations which he thinks must be fulfilled by theorganisation he is working for. When the organisation fails to do this, he develops afeeling of discontent or dissatisfaction. When an employee feels that something is unfairin the organisation, he is said to have a grievance. According to Jucius, a grievance is“any discontent or dissatisfaction, whether expressed or not, whether valid or not, arisingout of anything connected with the company which an employee thinks, believes or evenfeels to be unfair, unjust or inequitable.”

18.2 FEATURES

If we analyse this definition, some noticeable features emerge clearly:

i. A grievance refers to any form of discontent or dissatisfaction with any aspect ofthe organisation.

ii. The dissatisfaction must arise out of employment and not due to personal or familyproblems.

iii. The discontent can arise out of real or imaginary reasons. When the employeefeels that injustice has been done to him, he has a grievance. The reasons for sucha feeling may be valid or invalid, legitimate or irrational, justifiable or ridiculous.

iv. The discontent may be voiced or unvoiced. But it must find expression in someform. However, discontent per se is not a grievance. Initially, the employee maycomplain orally or in writing. If this is not looked into promptly, the employee feelsa sense of lack of justice. Now the discontent grows and takes the shape of agrievance.

v. Broadly speaking, thus, a grievance is traceable to perceived non-fulfillment ofone’s expectations from the organisation.

18.3 FORMS OF GRIEVANCES

A grievance may take any one of the following forms: (a) factual, (b) imaginary, (c)disguised.

18.3.1 Factual

A factual grievance arises when legitimate needs of employees remain unfulfilled, e.g.,wage hike has been agreed but not implemented citing various reasons.

18.3.2 Imaginary

When an employee’s dissatisfaction is not because of any valid reason but because of awrong perception, wrong attitude or wrong information he has. Such a situation maycreate an imaginary grievance. Though management is not at fault in such instances, stillit has to clear the ‘fog’ immediately.

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Human Resource Management 18.3.3 Disguised

An employee may have dissatisfaction for reasons that are unknown to himself. If he/she is under pressure from family, friends, relatives, neighbours, he/she may reach thework spot with a heavy heart. If a new recruit gets a new table and almirah, this maybecome an eyesore to other employees who have not been treated likewise previously.

18.4 CAUSES

Grievances may occur for a number of reasons:

18.4.1 Economic

Wage fixation, overtime, bonus, wage revision, etc. Employees may feel that they arepaid less when compared to others.

18.4.2 Work environment

Poor physical conditions of workplace, tight production norms, defective tools andequipment, poor quality of materials, unfair rules, lack of recognition, etc.

18.4.3 Supervision

Relates to the attitudes of the supervisor towards the employee such as perceived notionsof bias, favoritism, nepotism, caste affiliations, regional feelings, etc.

18.4.4 Work group

Employee is unable to adjust with his colleagues; suffers from feelings of neglect,victimisation and becomes an object of ridicule and humiliation, etc.

18.4.5 Miscellaneous

These include issues relating to certain violations in respect of promotions, safety methods,transfer, disciplinary rules, fines, granting leave, medical facilities, etc.

18.5 ADVANTAGES OF HAVING A GRIEVANCEHANDLING PROCEDURE

The following are some of the distinct advantages of having a grievances handlingprocedure:

i. The management can know the employees’ feelings and opinions about thecompany’s policies and practices. It can feel the ‘pulse’ of the employees.

ii. With the existence of a grievance handling procedure, the employee gets a chanceto ventilate his feelings. He can let off steam through an official channel. Certainproblems of workers cannot be solved by first line supervisors, for these supervisorslack the expertise that the top management has, by virtue of their professionalknowledge and experience.

iii. It keeps a check on the supervisor’s attitude and behaviour towards theirsubordinates. They are compelled to listen to subordinates patiently andsympathetically.

iv. The morale of the employees will be high with the existence of proper grievancehandling procedure. Employees can get their grievances redressed in a just manner.

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Grievances Handling18.6 GUIDELINES FOR HANDLING GRIEVANCES

The following guidelines may help a supervisor while dealing with grievances. He neednot follow all these steps in every case. It is sufficient to keep these views in mind whilehandling grievances (W. Baer, 1970).

i. Treat each case as important and get the grievance in writing.

ii. Talk to the employee directly. Encourage him to speak the truth. Give him apatient hearing.

iii. Discuss in a private place. Ensure confidentiality, if necessary.

iv. Handle each case within a time frame.

v. Examine company provisions in each case. Identify violations, if any. Do not holdback the remedy if the company is wrong. Inform your superior about all grievances.

vi. Get all relevant facts about the grievance. Examine the personal record of theaggrieved worker. See whether any witnesses are available. Visit the work area.The idea is to find where things have gone wrong and who is at fault.

vii. Gather information from the union representative, what he has to say, what hewants, etc. Give short replies, uncovering the truth as well as provisions. Treat himproperly.

viii. Control your emotions, your remarks and behaviour.

ix. Maintain proper records and follow up the action taken in each case.

x. Be proactive, if possible. Companies like VSP, NALCO actually invite workers toventilate their grievances freely, listen to the other side patiently, explain the reasonswhy the problems arose and redress the grievances promptly.

18.7 MANAGING DISMISSALS AND SEPARATION

The end result of both the terms – discharge and dismissal – is same, that is, the employee’sservices stand terminated. In practical usage, both terms are therefore usedinterchangeably. Some minor differences, however, are worth mentioning here. Whiledismissal is a sort of punishment against alleged misconduct, discharge is not always apunishment. When the employer examines all background factors leading to the terminationof services of an employee, he may simply discharge the employee instead of dismissinghim. Dismissal has a negative connotation and carries a punitive label alongside. A personwho is dismissed from service may find it difficult to find alternative employment, whencompared to a person who is discharged from service. In case of discharge, the errantemployee may be served a reasonable, advance notice. This is not so in the case ofdismissal where the services are terminated immediately. In case of dismissal, the employercan withhold the dues payable to the employee whereas in case of discharge, usually allthese are settled simultaneously. Finally, before dismissing an employee, the employerhas to hold disciplinary proceedings (domestic enquiry) in a proper way. In case ofdischarge, he may or may not go for it.

The grounds for dismissing an employee are clearly stated in Industrial Disputes Act,1947 (as amended in 1982) and the Industrial Employment (Standing Orders) Act, 1946– such as wilful insubordination, theft, fraud, dishonesty, habitual late coming, habitualneglect of work, wilful damage to property, disorderly violent behaviour, striking work inviolation of rules, taking bribes, etc.

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Human Resource Management 18.8 SEPARATION

Employee separations occur when employees cease to be members of an organisation.The service agreement between the employee and the employer comes to an end andthe employee decides to leave the organisation. Separations can take several forms suchas:

18.8.1 Resignation

An employee may decide to quit an organisation voluntarily on personal or professionalgrounds such as getting a better job, changing careers, wanting to spend more time withfamily, or leisure activities. The decision could, alternatively, be traced to the employee'sdispleasure with the current job, pay, working conditions or colleagues. Sometimes anemployee may be forced to quit the organisation compulsorily on grounds of negligenceof duty, insubordination, misuse of funds, etc. The resignation in this case, unlike voluntaryseparation, is initiated by the employer. If the employee refuses to quit, he may have toface disciplinary action.

When employees resign or quit an organisation, there will be a certain amount of disruptionto the normal flow of work. Replacing an experienced and talented person may not beeasy in a short span of time. Training new recruits would take time and may even proveto be a prohibitive exercise in terms of costs. The HR Department, therefore, shouldexamine the factors behind resignations carefully. Whenever possible, exit interviewsmust be conducted to find out why a person has decided to call it a day. To get at thetruth behind the curtain, departees must be encouraged to speak openly and frankly.The interviewer must ensure confidentiality of the information leaked out by the employee.The purpose of the interview must be explained clearly and the interviewer must listen tothe departee's views, opinions, critical remarks patiently and sympathetically. Every attemptmust be made to make the parting of ways more pleasant (e.g., conducting interview ina place where the employee is comfortable, giving a patient and sympathetic hearing tothe employee, wishing him success after settling all the dues, etc.) There should, however,be no attempt to (a) defend the company against criticism or attacks (b) justify actionswhich may have annoyed the employee (c) attack the departee's views or choice of newcompany or job (d) convince the employee to change his mind about leaving etc.

Box 18.1: Possible Exit Interview Questions to Get to the ‘Truth’ Behind the Curtain

1. Was the job challenging? Satisfying? Did it add value to you?

2. Was the location comfortable? Was the working environment enjoyable? Were you respectedas an individual?

3. What were the three positive elements you saw in the organisation?

4. What are the major drawbacks and weaknesses of the organisation?

5. Did you experience growth in terms of level and responsibilities?

6. Did the organisation provide you with sufficient inputs to grow as a professional?

7. Did you feel your boss/organisation provided you with enough freedom and space to allowyour creativity to blossom?

8. What changes would you like to see in this company if you were to reconsider joining it atsome point of time in future?

9. How does your new assignment/job compare with your assignment here, in terms of jobspecifications, designation, and compensation?

10. Did the organisation treat you well after you decided to quit? Where did it go wrong?

11. Would you like to rejoin the organisation? Why/why not?

12. What are the two most crucial reasons for your quitting?

Source: S. Khanna, “The EXIT Interview Technique,” Business Today, Jan. 7-21, 1996.

233

Grievances Handling18.8.2 Retirement

Like a quit, a retirement is normally initiated by the employee. However, a retirementdiffers from a quit in a number of ways. First, a retirement usually occurs at the end ofan employee's career. A quit can happen at any time. Second, retirements usually resultin the retiree's receiving benefits in the form of provident fund, pension, gratuity,encashment of earned leave etc., from the organisation. People who quit do not receivethese benefits, (without a minimum qualifying service period in case of voluntaryseparations). Finally, the organisation normally plans retirements in advance. HR staffcan groom current employees or recruit new ones during the intervening period in amethodical way. Quits are not easy to estimate and plan for. Employees retire fromservice on account of two reasons:

l Compulsory retirement: Government employees retire compulsorily after attainingthe age of superannuation (either 58 or 60). In the private sector, the retirementage may well go beyond 60, depending on a person's ability to perform well in acompetitive scenario.

l Voluntary retirement: In case of voluntary retirement, the normal retirement benefitsare calculated and paid to all such employees who put in a minimum qualifyingservice. Sometimes, the employer may encourage the employee to retire voluntarily–with a view to reduce surplus staff and cut down labour costs. Attractivecompensation benefits are generally in-built in all such plans (referred to as goldenhandshake scheme). To reduce post-retirement anxieties, companies these daysorganise counselling sessions, and offer investment related services (e.g., Citibank,Bank of America). Some companies extend medical and insurance benefits to theretirees also, e.g., Indian Oil Corporation.

Box 18.2: Why Employees Love NTPC?A wide-eyed recruit talks about an employee who was in coma for four months before passing away.The medical bills come to Rs. 1.5 crore. NTPC took care of it. Another talks about how it takes careof all hospitalisation expenses for employees and their families. A third talks about how the companysets up townships before beginning to work on a new plant. Last year NTPC spent Rs 102 crore (17hospitals run by the company with over 3000 doctors) on medical infrastructure and recovered justRs. 2 crore of that. The attrition rate, not surprisingly is very low at NTPC. [BT-Mercer-TNS Study,Business Today, 21-11-2004]

l Death: Some employees may die in service. When the death is caused byoccupational hazards, the employee gets compensation as per the provisions ofWorkmen’s Compensation Act, 1923. On compassionate grounds, someorganisations offer employment to the spouse/child/dependent of the employeewho dies in harness.

The normal separation of people from an organisation owing to resignation, retirement ordeath is known as ‘attrition’. It is initiated by the individual employee, not by the company.

18.8.3 Lay off

A layoff is a temporary removal of an employee from the payroll of an organisation dueto reasons beyond the control of an employer. Global competition, reductions in productdemand, changing technologies that reduce the need for workers, and mergers andacquisitions are the primary factors behind most layoffs. The services of the employeesare not utilised during the layoff periods. If the layoff is for a temporary period (sometimesit could the indefinite) the employee is likely to be called back to join the ranks onceagain. The employer-employee relationship, therefore, does not come to an end but ismerely suspended during the period of layoff. The purpose of layoff is to trim the extrafat and make the organisation lean and competitive.

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Human Resource Management Under the Industrial Disputes Act, 1947, a lay-off implies the following things(Section 2 KKK)

i. The employer is temporarily unable to employ some workers on a full-time basis.

ii. The reasons for the refusal of employment could be traceable to shortage of inputs,power, accumulation of stocks, breakdown of machinery etc.

iii. The employer-employee relationship stands suspended during the period of lay off.

iv. The employee gets (excluding holidays) only fifty per cent of his normally eligibletotal basic wages plus dearness allowance during the period of lay off. (Section 25 C)

v. To claim this compensation, the laid off workman (a) should not be a casual worker(b) his name must be there on the muster rolls (c) he must have one year's continuousservice (d) he must report for work at the appointed time at least once a day.

These conditions, however, do not apply when (i) the worker is able to find alternativeemployment in a nearby location (within 5 miles), (ii) the lay off is due to strike orslowing down of production by workers in another part of the establishment (iii) theindustrial establishment is seasonal in character, and (iv) where less than 20 workers arenormally employed therein.

Layoffs have a powerful impact on the organisation. They bring down the morale of theorganisation's remaining employees, who are forced to live in an environment of uncertaintyand insecurity. Sometimes, even employees whose services may be essential for theorganisation, may quit fearing loss of membership – thus causing further damage to theorganisation. The company's standing as a good place to work may suffer. It may bedifficult for the company to have the services of talented people afterwards. Layoffs,therefore, have to be carried out in a cautious way keeping the financial, psychologicaland social consequences in mind.

Consulting firms offer the following advice for telling employees that they will be laid off

Box 18.3: The Do’s and Don'ts of Laying off or Terminating Employees

(S. Alexander, The Wall Street Journal 81, 1991. Also see “Easing the Exit”, B. World, 1.9.2003)

18.8.4 Retrenchment

Retrenchment is the permanent termination of an employee's services due to economicreasons (such as surplus staff, poor demand for products, general economic slow down,etc.) It should be noted here that termination of services on disciplinary grounds, illness,

Dont's

l Don't leave the room, creating confusion. Tellthe employee that he or she is laid off orterminated.

l Don't allow time for debatel Don't make personal comments; keep the

conversation professionall Don't rush the employee off-site unless

security is really an issuel Don't fire people on important dates

(birthdays, anniversary of their employment,the day their mother died, etc.)

l Don't fire employees when they are onvacation or have just returned

l Employees who continue to work with thecompany should not be ignored. They are asvulnerable to the changes as the ones being letgo.

Do’s

l Give as much warning as possible for masslayoffs

l Sit down one-to-one with the individual in aprivate office

l Complete the firing session quicklyl Prepare the individual who is being asked to

leave to cope with his emotionsl Offer written explanations of severance

benefitsl Provide outplacement assistance away from

company headquartersl Be sure the employee learns about the layoff

from a manager, not a colleaguel Appreciate the contributions made by the

employee – if they are appropriate

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Grievances Handlingretirement, winding up of a business does not constitute retrenchment. In respect oforganisations employing 100 or more persons, the Industrial Disputes Act, 1947, makesit obligatory for the employer to give advance notice or pay equivalent wages before theactual lay off date. To claim 50 per cent of basic wages plus dearness allowances, theworkman (who is not a casual worker, whose name appears on pay roll, who hascompleted 12 months of continuous service) must present himself on each working dayat the appointed time inside the factory/office premises during the lay off period. Ifnecessary, he might be asked to report a second time during the same day. While layingoff workman, the employer is expected to follow the first-in-last-out principle. He shouldgive preference to such workmen if he advertises for reemployment against futureopenings. The employer has to give three months’ notice before retrenching the workerand get prior approval from the government as well.

Box 18.4

l Stop hiring people when the first signals of trouble ahead surface. This would send the rightmessage to the trade unions.

l Better to be on good terms with all the trade unions.

l Allay the workers’ suspicions by communicating with them directly.

l Design a severance package with incentives for training and redeployment.

l Never use pressure tactics to intimidate your workers into leaving.

Examples. JK Synthetics closed down its polyester staple fibre plant in 1981. A 14-year longlegal battle followed. The closure was declared illegal in 1995. Now 1100 workers may have tobe reinstated along with their salaries for 14 years! Companies have therefore started thevoluntary retirement schemes. NTC has shed 45,000 workers, ACC, British Oxygen, PremierAutomobiles–9,000, 3,700 and 3,500 employees respectively – after obtaining support fromunions. HMT, Caltex have gone a step ahead and offered the chance to workers who opt forVRS to start retail and ancillary activities on behalf of these companies! Caltex sold petrolpumps to workers accepting VRS: others like Philips, Sandoz, TISCO are trying to come outwith more attractive VRS packages.

Source: Business India. Jan 7-21, 1996 pp. 284-288

i. Outplacement: Employees who are retrenched/laid off may have difficulty in findingan alternative job if the market conditions are adverse. There might be a demandfor certain category of employees possessing multiple skills, but the retrenchedemployees may not have those ‘ marketable skills’. To fill this vacuum, someorganisations offer training in such skills and assist the retrenched employees infinding a suitable job elsewhere. Outplacement assistance includes ‘efforts madeby employer to help a recently separated worker find a job’ (Davis, p.269). Apartfrom training, some multinational firms offer assistance in the form of paid leave,travel charges for attending interviews, search firm charges, waiving bondrequirements to the retrenched employees. Bank of America has given a ‘fat sum’as liberal retrenchment compensation running into several lakhs of rupees to alleligible retrenched officers in 1998. It has also held counselling sessions for thoseofficers on issues such as how to repay their car/house loans, where for investtheir money, etc. Search firms were also hired to find suitable employment. Whenthe downsizing effort stabilised, Bank of America had even extended the formeremployees’ a ‘warm welcome back home!’ Such outplacement assistance, inwhatever form it is available, assures the remaining employees of the management’scommitment towards their welfare if a further downsizing ever happens to takeplace in future.

236

Human Resource Management Box 18.5: Merits and Demerits of Outplacement

Merits Demerits

l Shows the human face of the company. l May be time consuming and costly.

l Eases the pain of retrenchment. l Maintaining databases on other jobs isnot easy.

l Preserves the morale of those who remainl Can work only when retrenching awith the company. few managers at a time.

l Smoothens the way for future downsizingl Can be turned down by angry, disillusionedmoves. employees.

l Helps you retain your former employees’l Difficult to convince and implement at therespect. level of workers.

Source: Business India Jan 7-21, 1996 pp. 300-504

ii. Suspension: Suspension means prohibiting an employee from attending work andperforming normal duties assigned to him. It is a sort of punishment for a specifiedperiod and is generally resorted to only after a proper inquiry has been conducted.During suspension, the employee receives a subsistence allowance. If the chargesagainst the suspended employee are serious and are proved, suspension may leadto termination also.

18.8.5 Discharge and dismissal

Dismissal is the termination of the services of an employee as a punitive measure forsome misconduct. Discharge also means termination of the services of an employee, butnot necessarily as a punishment.A discharge does not arise from a single, irrational act.There could be many reasons for it such as:

l Inebriation and alcoholism

l Wilful violation of rules

l Carelessness

l Insubordination

l Physical disability

l Dishonesty

l Violent and aggressive acts

l Inefficiency

Discharge/dismissal is a drastic measure seriously impairing the earnings potential andthe image of an employee. It should be used sparingly, in exceptional cases where theemployee has demonstrated continued inefficiency, gross insubordination or continuedviolating rules even after several warnings. Before discharging the employee, advancenotice of the impending danger must be given and the reasons of discharge must bestated clearly. The employee should be given the opportunity to defend himself. If thegrounds under which an employee has been discharged are not strong enough, thereshould be a provision for reviewing the case. In any case, the punishment should not beout of proportion to the offence.

237

Grievances HandlingCheck Your Progress

1. Give one line definition of following:

(a) Trade Unions

(b) Industrial Relations

(c) Collective Bargaining

2. Differentiate different bargaining issues.

18.9 LET US SUM UP

Every employee has certain expectations which he thinks must be fulfilled by theorganisation he is working for. When the organisation fails to do this, he develops afeeling of discontent or dissatisfaction. A person who is dismissed from service may findit difficult to find alternative employment, when compared to a person who is dischargedfrom service. In case of discharge, the errant employee may be served a reasonable,advance notice. Layoffs have a powerful impact on the organisation. They bring downthe morale of the organisation's remaining employees, who are forced to live in anenvironment of uncertainty and insecurity. Discharge/dismissal is a drastic measureseriously impairing the earnings potential and the image of an employee. It should beused sparingly, in exceptional cases where the employee has demonstrated continuedinefficiency, gross insubordination or continued violating rules even after several warnings.


Organise a debate in class. Have one person take the position that ‘Grievances have tobe solved in a flexible manner, adopting an open door policy.’ Have another take theposition that ‘Grievances have to be redressed through a model grievances procedure’–framed in advance and applied in an objective way.

18.11 KEYWORDS

Grievances

Factual Grievances

Compulsory Retirement

Voluntary Retirement

Outplacement

Suspension

Lay off



(i) Collective Bargaining

(ii) Composite Bargaining

(iii) Grievances Handling

238

Human Resource Management (iv) Future of Trade Unionism

(v) Positive Discipline Approach

2. Describe Red Hot Rule in India.








LESSON

19LABOUR WELFARE

CONTENTS


19.1 Introduction

19.2 Importance & Implications of Labour Legislations

19.3 Objectives of the Labour Legislations

19.4 The Classification of Labour Legislations

19.5 The Regulative Labour Legislation

19.5.1 The Trade Unions Act, 1926

19.5.2 The Industrial Disputes Act, 1947

19.5.3 Industrial Relations Legislations Enacted by States of Maharashtra, MP, Gujarat,UP, etc.

19.5.4 Industrial Employment (Standing Orders) Act, 1946

19.6 The Protective Labour Legislations

19.6.1 Factories Act, 1948

19.6.2 The Shops and Establishments Acts

19.7 Wage-Related Labour Legislations

19.7.1 The Payment of Wages Act, 1936

19.7.2 The Minimum Wages Act, 1948

19.7.3 The Payment of Bonus Act, 1965

19.8 Social Security Labour Legislations

19.8.1 The Workmen’s Compensation Act, 1923

19.8.2 The Employees’ State Insurance Act, 1948

19.8.3 The Employees PF and Miscellaneous Provisions Act, 1952

19.8.4 The Maternity Benefit Act, 1961

19.8.5 Payment of Gratuity Act, 1972

19.9 Welfare Labour Legislations

19.10Miscellaneous Labour Legislations

19.11State Labour Laws

19.12Conclusion

19.13Employee Health

19.13.1 Need

Contd...

240



In this lesson we shall discuss about labour welfare. After going through this lesson youwill be able to:

(i) Discuss importance and implications of labour legislations.

(ii) Analyse employee health.

19.1 INTRODUCTION

The legal provisions regarding safety cover areas such as fencing of machinery, notemploying young persons near dangerous machines, using safe devices to cut off power,using good hoists and lifts, giving enough room for workers to move around safely, qualityflooring, providing ventilators for pumping out fumes, gases; and precautions to be takento prevent five accidents etc.

Health promotion covers areas such as healthy living, physical fitness, smoking cessation,stress to all troubled employees.

19.2 IMPORTANCE & IMPLICATIONS OF LABOURLEGISLATIONS

Conventions and Recommendations have covered wide range of subjects concerninglabour, for example, working conditions including hours of work, weekly rest, and holidays,wages, labour administration, employment of children and young persons includingminimum age of employment, medical examination, night work, employment of womenincluding maternity protection, night work and employment in unhealthy processes andequal pay, health, safety and welfare, social security, industrial relations including right to

19.14Legal Provisions Regarding Health

19.14.1 Cleanliness (11)

19.14.2 Wastes (12)

19.14.3 Ventilation and Temperature (13)

19.14.4 Dust and Fumes (14)

19.14.5 Artificial Humidification (15)

19.14.6 Overcrowding (16)

19.14.7 Lighting (17)

19.14.8 Drinking Water (18)

19.14.9 Latrines and Urinals (19)

19.14.10Spittoons (20)

19.15Measures to Promote Employee Health

19.16Let us Sum Up


19.18Keywords



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Labour Welfareorganise collective bargaining and conciliation, and employment and unemployment. ByJuly 2002, India had ratified 39 out of 184 Conventions adopted by ILO Provisions ofwhich most of the ratified Conventions have been incorporated in the labour laws of thecountry. Provisions of quite a number of Recommendations have, also, been embodied inlabour law.

19.3 OBJECTIVES OF THE LABOUR LEGISLATIONS

Different Objectives

Labour legislation in India has sought to achieve the following objectives:

(1) Establishment of justice - Social, Political and Economic.

(2) Provision of opportunities to all workers; irrespective of caste, creed, religion, beliefs;for the development of their personality.

(3) Protection of weaker sections in the community.

(4) Maintenance of Industrial Peace.

(5) Creation of conditions for economic growth.

(6) Protection and improvement of labour standards.

(7) Protect workers from exploitation.

(8) Guarantee right of workmen to combine and form association or unions.

(9) Ensure right of workmen to bargain collectively for the betterment of their serviceconditions.

(10) Make state interfere as protector of social well being than to remain an onlooker.

(11) Ensure human rights and human dignity.

Proper regulation of employee-employer relationship is a condition precedent for planned,progressive and purposeful development of any society. The objectives of labourlegislation are a developing concept and require ceaseless efforts to achieve them on acontinuous basis.

In its landmark judgement in Hindustan Antibiotics vs. The Workmen (A.I.R. 1967, S.C.948; (1967) 1, Lab.L.J.114) the Supreme Court of India made a significant observation.The object of the Industrial law, said the Court, was to bring in improvements in theservice conditions of industrial labour by providing them the normal amenities of life,which would lead to industrial peace. This would accelerate the productive activities ofthe nation, bringing prosperity to all and further improving the conditions of labour.

19.4 THE CLASSIFICATION OF LABOUR LEGISLATIONS

On the basis of specific objectives, which it has sought to achieve, the labour legislationscan be classified into following categories:

(1) Regulative

(2) Protective

(3) Wage-Related

(4) Social Security

(5) Welfare both inside and outside the workplace

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Human Resource Management 19.5 THE REGULATIVE LABOUR LEGISLATION

The main objective of the regulative legislation is to regulate the relations betweenemployees and employers and to provide for methods and manners of settling industrialdisputes. Such laws also regulate the relationship between the workers and their tradeunions, the rights and obligations of the organisations of employers and workers as wellas their mutual relationships.

19.5.1 The Trade Unions Act, 1926

Trade unions are primarily formed to regulate the relations between workmen andemployers. The Act provides for registration of trade unions, which also includesassociation of employers. Upon registration, trade unions enjoy certain protection andprivileges under the law. In addition, the Act also provides for imposing restrictions onthe conduct of any trade or business. Registration of a trade union is not compulsory buta registered union enjoys certain rights and privileges under the Act, it is always desirableto get a trade union registered. The Act requires that at least 50 per cent of the officebearers of a union should be actually engaged or employed in the industry. A registeredtrade union is a body corporate with perpetual entity under a common seal. It can acquire,hold, sell or transfer any movable or immovable property and can be party to contracts.It can sue or can be sued in his own name. From the HR manager's point of view, it isessential to invite registered trade unions of the unit only for collective bargaining andalso form participative forums like works committee, etc., from their nominatedrepresentative.

19.5.2 The Industrial Disputes Act, 1947

The Industrial Disputes Act, 1947 primarily regulates industrial relations in India. TheAct provides a machinery and procedure for settlement of industrial disputes by negotiation,without resorting to strikes and lockouts. The scope of the Act extends to the whole ofIndia for every industrial establishment carrying on any business, trade, irrespective ofthe number of people employed. However, the Act is not applicable for people employedin managerial or administrative capacity and for those who are employed in Army, AirForce and Navy, Police Services and Prison Services. The Act defines industrial disputeas any dispute or difference between employers and employees or between workmenand workmen, which is connected with the employment or non-employment or the termsand conditions of employment. A tentative list of disputes, covered under this Act isreproduced below:

i. The propriety or legality of standing orders.

ii. Discharge or dismissal

iii. Matters pertaining to reinstatement or grant of relief for wrongful dismissal.

iv. Matters pertaining to withdrawal of any concession or privilege.

v. Matters pertaining to strike or lockout

vi. Payment of wages, including periodicity and mode of payment.

vii. Leave and hours of work

viii. Holidays

ix. Bonus

x. Retirement benefits

xi. Discipline

xii. Non-implementation of award, etc.

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Labour Welfare19.5.3 Industrial Relations Legislations enacted by states of Maharashtra,MP, Gujarat, UP, etc.

Labour legislation in India can be traced back to 1850’s with the enactment ofApprentices Act. This Act was initially intended for destitute child to enable them todevelop their skill base and get a job when they grow up. This was followed by the FatalAccidents Act, 1955, Employers and Workmen (Disputes) Act, 1860, Factories Act,Mines Act, Plantation Labour Act and series of other legislations. Labour is a commoncentral and the state subject. The constitution of India (Article 246/4) empowers boththe central and the state Governments to legislate on issues related to labour, encompassingissues on trade unions, industrial disputes, social security, social insurance, employmentand unemployment, welfare related issues, covering working conditions, providentfunds, pensions, maternity leave and benefits, workmen’s compensation, etc. Thestate Governments are empowered to change and modify labour laws, enacted by thecentral Government considering the specific issues and conditions of labour prevailing inthe states.

19.5.4 Industrial Employment (Standing Orders) Act, 1946

This Act requires employers to clarify conditions of employment so as to enable theworkmen (employed by them) to understand the rules of conduct pertaining to workinghours, holidays, attendance, leave, termination of employment, suspension or dismissal,misconduct, etc. The Act is applicable to industrial establishments, employing 100 ormore workmen. Under this Act, employers are required to submit a draft of standingorders to the certifying officer for certification. Upon certification it receive the force oflaw and employers are required to display the text in the language of the workmen andin English prominently. Once certified, employers cannot modify the standing orderswithout the approval of the certifying officer. Model standing orders cover followingareas:

(i) Basis of classification of workman – permanent, probationers, temporary, casual,apprentices, badlis

(ii) Information on working time

(iii) Information on holidays and paydays

(iv) Wage rates

(v) Shift work

(vi) Attendance and late coming

(vii) Leave

(viii) Payment of wages

(ix) Stoppage of work

(x) Termination of employment

(xi) Act of misconduct, which is liable for disciplinary action, etc.

Standing orders are guidelines for HR decisions, hence HR managers must know legalinterpretation of standing orders.

19.6 THE PROTECTIVE LABOUR LEGISLATIONS

Under this category come those legislations whose primary purpose is to protect labourstandards and to improve the working conditions. Laws laying down the minimum labourstandards in the areas of hours of work, supply, employment of children and women, etc.in the factories, mines, plantations, transport, shops and other establishments are includedin this category. Some of these are the following:

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Human Resource Management 19.6.1 Factories Act, 1948

This Act is divided into twelve chapters covering 141 sections, which again aresupplemented by three schedules. The first Act was enacted in 1881 to regulate workingconditions in factories primarily for women and children and to provide them health andsafety measures. In 1911 the new Factories Act was enacted, replacing the old one,covering also the hours of work for adults. The Act was further improvised in 1934,incorporating recommendations of the Royal Commission of Labour. The new Act of1948 replaced the earlier one and through a series of amendments made from time totime, the Act is now more comprehensive covering all areas of working conditions oflabour.

19.6.2 The Shops and Establishments Acts

The Act in essence a state legislation. It seeks to regulate the working conditions ofworkers in the unorganized sector, including shops and establishments which do notcome under the Factories Act Regulations for working hours, rest intervals, overtime,holidays, termination of service, maintenance of shops and establishments and otherrights and obligations of the employer and employees are laid down.

19.7 WAGE-RELATED LABOUR LEGISLATIONS

Legislations laying down the methods and manner of wage payment as well as theminimum wages come under this category:

19.7.1 The Payment of Wages Act, 1936

The Act is intended to regulate payment of wages in a particular form at regular intervalswithout any unauthorised deductions. It is applicable to the employees receiving wagesbelow Rs.1,600 per month. As per the Act, employers are responsible for payment ofwages to the employees duly fixing the wage periods (which in no case should exceedone month), deciding about time of payment as per the norms (which requires paymentwithin seven days of the expiry of the wage period for establishment where less than1,000 people are employed and in other cases within ten days of the expiry of wageperiod), mode of payment (in cash or by cheque or by crediting to employee's bankaccount with prior consent) and ensuring no unauthorised deductions. All these aspectsmust be known to the HR manager.

19.7.2 The Minimum Wages Act, 1948

The Act provides for minimum statutory wages for scheduled employment. The Actalso stipulates maximum daily working hours, weekly rest and overtime. It prevails overthe rates fixed under any award agreement. The Act empowers the State Governmentto fix minimum wages, failing which they cease the right to engage labour and run theindustry. Wages, as per the Act, include all remuneration capable of being expressed interms of money including house rent allowance. However, it excludes the value of housingaccommodation, supply of light, water, medical attendance, employer's contribution toprovident fund and pension fund, travelling allowances or the value of travelling concession,gratuity payable on discharge or any other payments made to defray special expenses.For HR managers it is important to consider all these aspects while designing compensationpackage.

19.7.3 The Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 imposes statutory liability on employers (coveredunder the Act) to pay bonus to employees according to the prescribed formula, linkingthe bonus with profits or productivity. Bonus is payable to every employee receiving

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Labour Welfaresalary or wages up to Rs. 3,500 per month, provided the employee has worked at leastfor 30 days in that year, save and except those employees who have been dismissedfrom service for fraud, riotous or violent behaviour, or theft, misappropriation or sabotageof any property of the establishment. Such employees ceases the right to get bonus evenfor previous unpaid years, irrespective of the fact that they have committed such acts inthe present year. Employers can deduct from the bonus any customary payment madeto the employees (festival or interim bonus) earlier. Employers can also recover anyfinancial loss caused for the misconduct of the employees.

19.8 SOCIAL SECURITY LABOUR LEGISLATIONS

They cover those legislations, which intend to provide to the workmen, social securitybenefits under certain contingencies of life and work.

19.8.1 The Workmen’s Compensation Act, 1923

Factories and establishments which are not covered under the Employees State InsuranceAct, are covered under this Act to provide relief to workmen and/or their dependents incase of accidents arising out of and in the course of employment causing either death ordisablement of workmen. The workmen's compensation (Amendment) Act, 2000 w.e.f.8-12-2000 has brought all the workmen within the limit of this Act, irrespective of theirnature of employment. Under the Act, the employers are under obligation to paycompensation for any accident suffered by an employee in the course of employment,failing which the Act provides for penalties. There must be some causal connection withemployment to become eligible for compensation, which may not necessarily be insidethe workplace. Causal relationship is established by the circumstantial evidence, whichmy be even in cases where workmen sustain injury while coming to work or while goingto his house after completion of work.

19.8.2 The Employees’ State Insurance Act, 1948

The principal objective of this Act is to provide to the workers medical relief, cashbenefits for sickness, compensation for employment injuries (which also coversoccupational diseases), pension to the dependents of deceased workers and maternitybenefits to women workers. All these benefits are given from a contributory fund. Onceworkmen are covered under ESI Scheme, compensation under Workmen's CompensationAct for employment injuries are not payable. The Act is applicable to all factories(excluding seasonal factories) employing ten or more (when manufacturing process iscarried out using power). For factories carrying out the manufacturing process withoutthe aid of power, the said number is 20 or more persons. The scope of the Act coversevery employee, including those engaged as casual or by a contractor, provided they donot receive wages not exceeding Rs.6,500 per month. Apprentices engaged under theApprentices Act are not eligible for ESI benefits. The Act requires registration ofeligible factories and establishments within a prescribed time limit. Similarly entitledemployees are also required to be insured in a prescribed manner under the Act. Sincethe nature of insurance is contributory, employers are required to pay @ 4.75 per centand employees are required to contribute @ 1.75 per cent of the wages. However,such employees who are drawing less than Rs.40 as daily wages are exempted fromthe requirement of contribution. The Act provide benefits at prescribed rate and imposespenalty for violation up to 5 years imprisonment and fine upto Rs. 25,000.

19.8.3 The Employees PF and Miscellaneous Provisions Act, 1952

The Act provides for compulsory contributory fund for social security of the employeesand their dependents (in case of death). It extends to every factory, establishmentemploying 20 or more persons. The Central Government , however, by notification, brings

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Human Resource Management any establishment under the purview of the Act even in cases where such establishmentsemploy less than 20 persons. However, cooperative societies employing less than 50persons and working without the aid of power, newly set up establishments (for initial 3years), and State/Central Government establishments (where they have their ownschemes) are immune from the provisions of this Act. The Central Government hasframed three schemes under the Act, i.e. Employees' Provident Fund Scheme, 1952 (forprovident funds), Employees' Family Pension Scheme, 1971 for providing family pensionand life assurance benefit, which been merged with, Employees' Pension Schemes, 1995and the employees' Deposit Linked Insurance Scheme, 1976. The Act requires employersto contribute amount @ 12 per cent of the Wages, D.A. etc. (10% in case of BIFRreferred establishments or establishments employing less than 20 persons or anyestablishments in the jute, beedi, brick, coir or gaur gum industry) and ensure similardeduction from employees and deposit the same together with administrative chargesand required returns/attachments to the regional provident fund office or to their ownprivate provident fund scheme (approved by the Provident Fund Commissioner).

19.8.4 The Maternity Benefit Act, 1961

This provides maternity benefits to women employees. It sets out that a woman mayavail 3 months leave with full salary before or after the birth of her child.

19.8.5 Payment of Gratuity Act, 1972

This Act is also a social security measure to provide retirement benefit to the workmen,who have rendered long and unblemished service to the employer. Employees are entitledto receive gratuity under the Act, provided they have rendered continuous 5 years serviceor more at the rate of 15 days wages for each completed year, subject to a maximum ofRs.3,50,000. The gratuity may be wholly or partly forfeited by the employer if terminationof services of an employee is due to his riotous or disorderly conduct or any other act ofviolence or any offence, including moral turpitude committed in the course of hisemployment.

Chapter V A of the Industrial Disputes Act 1947 is also, in a manner of speaking, of thecharacter of social security in so far as it provides for payment or lay-off, retrenchmentand closure compensation.

19.9 WELFARE LABOUR LEGISLATIONS

Legislations coming under this category aim at promoting the general welfare of theworkers and improving their living conditions. Though, in a sense, all labour-laws can besaid to be promoting the welfare of the workers and improving their living conditions andthough many of the protective labour laws also contain chapters on labour welfare; thelaws coming under this category have the specific aim of providing for improvements inthe living conditions of workers. They also carry the term “Welfare” in their titles.

i. Limestone and Dolomite Mines Labour Welfare Fund Act, 1972

ii. The Mica Mines Welfare Fund Act, 1946

iii. The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour WelfareFund Act, 1976

iv. The Cine Workers Welfare Fund Act, 1981

v. In addition, some state governments have also enacted legislations for welfarefunds

vi. Beedi Workers Welfare Fund Act, 1976

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Labour Welfare19.10 MISCELLANEOUS LABOUR LEGISLATIONS

Besides the above, there are other kinds of labour laws, which are very important. Someof these are:

i. The Contract Labour (Regulation and Abolition) Act, 1970

ii. Child Labour (Prohibition and Regulation) Act, 1986

iii. Building and other construction workers (Regulation of Employment and Conditionsof Service) Act, 1996

iv. Apprentices Act, 1961

v. Emigration Act, 1983

vi. Employment Exchange (Compulsory Notification of Vacancies) Act, 1959

vii. Inter State Migrant Workmen (Regulation of Employment and Condition of Service)Act, 1979

viii. Sales Promotion Employees (Condition of Service) Act, 1976

ix. Working Journalists and other Newspapers Employees (Condition of Service andMiscellaneous Provision) Act, 1955.

19.11 STATE LABOUR LAWS

General

An important feature of almost all labour laws is the existence of employer-employeenexus. Besides, each labour law has its provisions in terms of coverage, based mainly onthe number of employees, salary levels and so on. The definition of expressions used indifferent labour laws is not necessarily uniform. All these have resulted in considerableamount of litigation, leading to a vast amount of industrial jurisprudence.

Another important point to note is that while all the labour laws, excepting Shops andEstablishment Acts, are enacted by Parliament, quite a few of them are implemented,both by the Central Government and the State Governments (including Union Territories);the jurisdiction being determined by the definition of the term ‘appropriate government’in the relevant statute. It is also relevant to point out that some of the Parliamentary lawsare implemented exclusively by the State Governments, for example Trade Unions Act,1926; Workmen’s Compensation Act, 1923; Plantation Labour Act, 1951; WorkingJournalists Act 1955; Factories Act 1948 and so on.

19.12 CONCLUSION

The evolution of labour jurisprudence is the culmination of the incessant struggle wagedby the workers’ all over the world, for just and better conditions of work as well assecurity of their job. Labour legislations have now acquired the status of a separatebranch of jurisprudence because of its special features and changing juristic ideas.Therefore, an idea about its concept, origin, development, objectives, approaches, influencesand classification etc. will be of immense help to comprehend its principles.

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Human Resource Management Check Your Progress


(a) Two ways of dealing with employees includes ...................... discipline approachand ...................... discipline approach.

(b) ...................... builds on philosophy that violable are action that usually can becorrected without penalty.

(c) ...................... state that penalties must be appropriate to the violation.

(d) Stoane and Whitney explains ......................

(e) ...................... and ...................... are the primary focus areas of collective bargaining.


(a) Act of misconduct (i) 1946

(b) Red hot stone role (ii) Amended in 1982

(c) Standing orders Act (iii) 1976

(d) Industrial discipline Act (iv) Unlawful, Corrupt and disloyal

(e) Equal Remuneration Act (v) Douglas Mc Gregor

19.13 EMPLOYEE HEALTH

Organisations are obliged to provide employees with a safe and healthful environment.Health is a general state of physical, mental and emotional well being. Safety is protectionof a person’s physical health. The main purpose of health and safety policies is the safeinteraction of people and the work environment. Poor working conditions affect employeeperformance badly. Employees may find it difficult to concentrate on work. It would betoo taxing for them to work for longer hours. Their health may suffer. Accidents andinjuries may multiply causing enormous financial loss to the company. Absence andturnover ratios may grow. A company with a poor safety record may find it difficult tohire and retain skilled labour force. The overall quality of work may suffer. Many deaths,injuries and illnesses occur because of safety violations, poor equipment design or grossnegligence. The Union Carbide accident in Bhopal, for example, which killed over 4,000people in 1984, is considered by most experts to be the result of equipment design flawswhich could have been avoided. Union labour ministry’s records place companies inMaharashtra and Gujarat as the most dangerous places to work, with over 25,000 and13,000 accidents respectively. The biggest offenders are generally from jute mills, leadbattery manufactures, chemical units, textile mills, match and fireworks industry especiallyin Sivakasi, automotive industry, sugar crushing units, mining, heavy construction, flourmills, etc.

19.13.1 Need

Industrial heath is essential to:

i. Promote and maintain the highest degree of physical, social and mental well beingof workers.

ii. Improve productivity and quality of work.

iii. Reduce accidents, injuries, absenteeism and labour turnover.

iv. Protect workers against any health hazard arising out of work or conditions inwhich it is carried on.

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Labour WelfareThe following table indicates the primary health and safety responsibilities of the HRdepartment and line managers.

Box 19.1: Typical Health and Safety Responsibilities

HR Unit Managers

l Coordinates health and safety programmesl Monitor health and safety of employees dailyl Develops safety reporting system l Coach employees to be safety consciousl Offers accident investigation expertise l Investigate accidentsl Provides technical expertise on accident l Observe health and safety behaviour of

prevention employeesl Develops restricted- access procedures l Monitor workplace for security problems

and employee identification systems l Communicate with employees to identifyl Trains managers to recognise and handle potentially difficult employees

difficult employee situations l Follow safety provisions and securityprocedures and recommend changes asneeded

19.14 LEGAL PROVISIONS REGARDING HEALTH

The Factories Act, 1948, lays emphasis on the following preventive measures(Sec. 11 to 20)

19.14.1 Cleanliness (11)

Every factory shall be kept clean and free from effluvia. Dirt must be removed daily.Benches, staircases, passages and the floor of the workroom must be cleaned daily sothat there is no accumulation of dirt. Workroom floors must be washed at least once aweek, with some disinfecting fluid. Walls, partitions, ceilings, doors, windows, etc., bepainted, varnished periodically.

19.14.2 Wastes (12)

There must be effective arrangements for the disposal and/ or treatment of waste andeffluents.

19.14.3 Ventilation and temperature (13)

Every workroom in the factory must have proper natural ventilation, permitting circulationof fresh air. The room temperature should be kept at a level comfortable to workers.The walls and roofs should be of such material and of such design so as to keep thetemperature low. High temperature may be controlled by whitewashing, spraying andinsulating the factory premises by screening outside walls, windows and roofs.

19.14.4 Dust and fumes (14)

Effective arrangements must be made to prevent or reduce the inhalation and accumulationof dust and fumes. Exhaust appliances should be employed near the place of origin ofdust and fumes.

19.14.5 Artificial humidification (15)

In cotton textile and cigarette manufacturing units where artificial humidification is used,State Government rules should be followed. Water used for artificial humidification mustbe properly purified.

19.14.6 Overcrowding (16)

No room in the factory should be overcrowded. There should be at least 14.2 cubicmeters of space for every workman.

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Human Resource Management 19.14.7 Lighting (17)

The factory must have sufficient and suitable lighting arrangements – both natural andartificial glazed windows and skylights used to light the workroom should be kept clean.Provisions should be made for the prevention of glare and the formation of shadows inthe work spot.

19.14.8 Drinking water (18)

The factory must provide wholesome drinking water at suitable, convenient points. Allsuch points are marked ‘drinking water’ clearly in a language understood by majority ofworkers. Every such point should be away (not within 6 meters range) from urinals,latrine, spittoons, open drains, etc. Where the factory employs more than 250 employees,suitable arrangements must be made to provide cool drinking water during the hot summermonths.

19.14.9 Latrines and urinals (19)

The latrines and urinals are (a) maintained separately for male and female workers,(b) having sufficient enclosed space, (c) conveniently situated and accessible to allworkmen, (d) adequately lighted and ventilated, (e) cleanly kept at all times, (f) maintainedproperly by employing sweepers for this purpose.

19.14.10 Spittoons (20)

A sufficient number of spittoons should be provided at convenient places in every factoryand these should be maintained in a clean and hygienic condition.

19.15 MEASURES TO PROMOTE EMPLOYEE HEALTH

Health promotion at the work place may be broadly defined as any effort to preventdisease or premature death through behavioural and organisational change. Healthpromotion focuses on prevention rather than treatment or cure. Therefore the healthprogramme at the company is planned around improvement and prevention of controllablerisk factors such as smoking, obesity, high level of cholesterol, stress, hypertension andlow level of physical fitness, which are responsible for most major diseases. Promotinghealth consciousness is not an easy task. It requires continuous education, systematiccampaign and genuine support from top management. Before the company starts planningfor the programme, it must investigate the needs and resources of both the employeesand the organisation. The planning programme, basically, involves five steps: settinggoals, developing the plan, allocation of resources, implementation and evaluationof the plan. The core health promotion activities may cover such areas as:

i. Healthy living

ii. Eating wisely

iii. Exercise and Physical fitness

iv. Smoking cessation

v. Stress management

vi. Protecting one self from workplace hazards.

The initial effort and investment required to institute such health promotion programmesmay prove to be quite heavy but the long run rewards are quite fruitful: improvementsin employees health result in better work attitudes, higher morale, job satisfaction, reducedabsenteeism and turnover.

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Labour WelfareBox 19.2: Components of A Typical Wellness Programme (Epstein)

The basic objective of wellness programmes is to help employees build lifestyles that will help themto achieve their full physical and mental potential. Such a programme is built around the followingthings:

l Educating employees about health-risk factors such as high blood pressure, smoking, highcholesterol levels, diabetes, a sedentary lifestyle, obesity, stress, poor nutrition etc.

l Identifying the health- risk factors that each employee faces

l Helping employees eliminate or reduce these risks through healthier lifestyles and habits

l Enabling employees to self monitor and evaluate where they stand from time to time.

19.16 LET US SUM UP

The main objective of the regulative legislation is to regulate the relations betweenemployees and employers and to provide for methods and manners of settling industrialdisputes. The Industrial Disputes Act, 1947 primarily regulates industrial relations inIndia. The scope of the Act extends to the whole of India for every industrial establishmentcarrying on any business, trade, irrespective of the number of people employed. Thestate Governments are empowered to change and modify labour laws, enacted by thecentral Government considering the specific issues and conditions of labour prevailing inthe states. The evolution of labour jurisprudence is the culmination of the incessantstruggle waged by the workers’ all over the world, for just and better conditions of workas well as security of their job. Organisations are obliged to provide employees with asafe and healthful environment. Safety is protection of a person’s physical health. Themain purpose of health and safety policies is the safe interaction of people and the workenvironment. Health promotion focuses on prevention rather than treatment or cure.


Working individually or in groups, answer the question: Is there such a thing as an accident-prone-person? Develop your arguments using examples of actual people who sufferedinjuries while at work more frequently than the others, due to various reasons.

19.18 KEYWORDS

Labour Legislation

Wage Rates

Safety Record

Personnel Management


1. Give the main objectives of Labour Legislation?

2. Classify Labour Legislation in detail.

3. Give a brief description about Wage-Related Labour Legislations.

4. Write short notes on

(i) Welfare Legislations

(ii) State Labour Laws

5. Explain the various provisions regarding health.

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Human Resource Management 19.20 SUGGESTED READINGS







LESSON

20AUDITING HR FUNCTIONS

CONTENTS


20.1 Introduction

20.2 Objectives

20.3 Types of Personnel Records

20.4 Need for Personnel Audit

20.5 Benefits

20.6 Scope of Personnel Audit

20.7 Utility of Records

20.8 HR Audit Process

20.8.1 Effectiveness Ratios

20.8.2 Accident Ratios

20.8.3 Organisational Labour Relations Ratios

20.8.4 Turnover and Absenteeism Ratios

20.8.5 Employment Ratios

20.9 Frequency of Audit

20.9.1 Types of Audit

20.9.2 Audit Report

20.10Problems in HR Audit

20.11Future of HRM Function

20.12Let us Sum Up


20.14Keywords




In this lesson we shall discuss about auditing HR functions. After going through thislesson you will be able to:

(i) Analyse auditing Hr functions and types of personal records.

(ii) Discuss future of HRM function and HR audit process.

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Personnel records and reports provide information regarding the utilisation of humanresources in an objective way. However, in most cases this is not sufficient. A criticalevaluation of manpower programmes might be required to find out the areas whereimprovements are needed and to set things in order. In place of informal impressionsgathered and summarised through records and reports, a systematic and analytical searchis made to find out the effectiveness of personnel management. According to Seybold,personnel audit refers to an examination and evaluation of policies, procedures and practicesto determine the effectiveness of personnel management. Personnel audit covers basicallythree things:

1. Measurement and evaluation of personnel programmes, policies and practices;

2. Identification of gap between objectives and results; and

3. Determination of what should or what should not be done in future.

20.2 OBJECTIVES

“The basic objective of personnel audit is to know how the various units are functioningand how they have been able to meet the policies and guidelines which were agreedupon; and to assist the rest of the organisation by identifying the gaps between objectivesand results, for the end-product of an evaluation should be to formulate plans forcorrections of adjustments” (Gray).

The objectives of personnel audit are:

i. To review the organisational system, human resources subsystem in order to findout the efficiency of the organisation in attracting and retaining human resources.

ii. To find out the effectiveness of various personnel policies and practices.

iii. To know how various units are functioning and how they have been able toimplement the personnel policies, and

iv. To review the personnel system in comparison with organisations and modify themto meet the challenges of personnel management.

20.3 TYPES OF PERSONNEL RECORDS

Personnel records include the following:

i. Job application and test scores

ii. Job descriptions and job specifications

iii. Interview results

iv. Employment history

v. Medical reports

vi. Attendance records

vii. Payroll

viii. Employee ratings

ix. Training records

x. Leave records

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Auditing HR Functionsxi. Accident and sickness records

xii. Grievances, disputes records

xiii. Contracts of employment

xiv. Records to be kept under various statutes

20.4 NEED FOR PERSONNEL AUDIT

Though there is no legal obligation to audit personnel policies and practices, some of themodern organisations have accepted it due to certain compelling reasons:

i. Increasing size of the organisation and personnel in several organisations.

ii. Changing philosophy of management towards human resources.

iii. Increasing strength and influence of trade unions.

iv. Changing human resources management philosophy and thereby personnel policiesand practices throughout the world.

v. Increasing dependence of the organisation on the human resources system and itseffective functioning.

20.5 BENEFITS

The benefits of a human resource management audit may be summarised thus:

i. Identifies the contributions of the HR department.

ii. Improves the professional image of HR department.

iii. Encourages greater responsibility and professionalisation among members of HRDepartment.

iv. Classifies the HR departments’ duties and responsibilities.

v. Stimulates uniformity of personnel policies and practices.

vi. Finds critical personnel problems.

vii. Ensures timely compliance with legal requirements.

viii. Reduces human resource costs.

20.6 SCOPE OF PERSONNEL AUDIT

The scope of personnel audit is very wide. It covers areas like personnel philosophy,policies, programmes, practices and personnel results. The major areas of personnelaudit include programming, forecasting and scheduling to meet organisation and personnelneeds. The areas of recruitment, selection, careers, promotions, training and developmentalso come within the scope of personnel audit. Further, the areasof leadership, welfare, grievances, performance appraisal, employee mobility, industrialrelations are also included within the scope of personnel audit. The areas and levels ofpersonnel audit, according to Dale Yoder, are fairly exhaustive (See Box 20.1).

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Human Resource Management Box 20.1: Levels & Examples of Audit Data

Major Areas Level I – Results Level II - Programmes Level III – Policy & Procedures

Planning:

Forecasting & scheduling Personnel shortagesTime bound or Explicit statement toto meet organisation & supplies, layoff, etc. network cost/benefitprovide inclusive personnel needs.budget, etc. plans for present & future

Staffing & Development:

Defined requirements & Recruitment times In house & out house Let cream rise; non-careers; sources, requirement, costs; training times training programmes; discrimination, etc.selection, training, promotions cost, labour turnover etc.guidance in careers, etc.

Organising:

Maintaining structures for Feedback, reader Job definitions for Encourage flexibility,co-ordinating, communi- interest, extent of individuals, depart- reduce resistance tocating, collaborating, etc. formal, organisation, ments, task forces, change, effective

reports, records, etc. house organs, etc. three-way communication, etc.

Motivation & Commitment:Individual & group motiva- Productivity, Job enlargement; Gain high personaltion, interest, effort, contri- performance norms wage & salary identification, ensurebution comparative costs, administration; wholeman satisfactions.

etc. morale survey;exit interviews;fringe benefits, etc.

Administration:Style of leadership and Suggestions, Consultative Style adapted tosupervision; delegation, promotions, grievances,supervision; collective changing expectations; negotiation.discipline, union- union-management bargaining, participativemanagement cooperation. committees, etc. involvement, etc.

Research & Innovation:Experiments & theory Changes, experiments, R&D approach in Test old & new theory;testing in all areas. research reports, all areas; suggestion encourage creativity in

publications. plans, etc. management.

20.7 UTILITY OF RECORDS

Several personnel records are used in the process of personnel audit. They include:payroll, total and unit labour cost, interview reports, test scores, training records, labourproductivity, work stoppage due to strikes, lockout, layoff, accident reports, turnoverreports, absenteeism reports, etc.

20.8 HR AUDIT PROCESS

The personnel audit should probe much deeper, evaluating personnel policies, programmes,philosophy, practices and concepts comparing with standards and with those of thepersonnel records of the said organisation and other organisations. The level and thedepth of the investigation should be decided in advance. The process of personnel audit,usually carried out through an attitudinal survey or by interpreting data, includes:

i. Identifying indices, indicators, statistical ratios and gross numbers in some cases.

ii. Examining the variations in time-frame in comparison with a similar previouscorresponding period.

iii. Comparing the variations of different departments during different periods.

iv. Examining the variations of different periods and comparing them with similar unitsand industries in the same region.

v. Drawing trend lines, frequency distributions and calculating statistical correlations.

vi. Preparing and submitting a detailed report to the top management and to the managersat appropriate levels for information and necessary action.

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Auditing HR FunctionsVarious personnel policies, procedures and practices can be evaluated by asking variousquestions of the following type:

1. What are they? (i.e., policies, procedures/ practices).

2. How are they established?

3. How are they communicated to various managers and employers concerned?

4. How are they understood by individual employers, supervisors and managers atvarious levels?

5. Are they consistent with the managements’ organisational philosophy and humanresource management philosophy?

6. Are they consistent with the existing trends towards human resource managementand research?

7. What are the controls that exist for ensuring their effective and uniform application?

8. What measures exist to modify them to meet the organisational requirements?

Most organisations that employ HR audit examine the employment statistics pertainingto a period—making use of ratios (given below):

20.8.1 Effectiveness Ratios

Ratio of number of employees to total output in general.

Sales in dollars per employee for the whole company or by organisational unit (business).

Output in units per employee hour worked for the entire organisational unit.

Scrap loss per unit of the organisation.

Payroll costs by unit per employee grade.

20.8.2 Accident Ratios

Frequency of accident rate for the organisation as a whole or by unit.

Number of lost-time accidents.

Compensation paid for accidents per 1,000 hours worked.

Accidents by type.

Accidents classified by type of injury to each part of the body.

Average cost of accident by part of the body involved.

20.8.3 Organisational Labour Relations Ratios

Number of grievances filed.

Number of arbitration awards lost.

20.8.4 Turnover and Absenteeism Ratios

Attendance, tardiness, and overtime comparisons by organisational unit as a measure ofhow well an operation is handling employees.

Employee turnover by unit and for the organisation.

20.8.5 Employment Ratios

Vacations granted as a percentage of employees eligible.

Sick-leave days granted as a percentage of labour-days worked.

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Human Resource Management Maternity leaves granted per 100 employees.

Educational leaves granted per 100 employees.

Personal leaves granted per 100 employees.

Employment distribution by chronological age.

Employment distribution by length of service with organisation.

Employment distribution by sex, race, national origin, religion.

Managerial distribution by chronological age, sex, race, national origin, religion.

Average age of workforce.

Average age of managerial workforce.

20.9 FREQUENCY OF AUDIT

Generally top management thinks of personnel audit only when serious crisis occurs likestrikes, increase in the number and/or magnitude of grievances or conflicts, etc. Thistype of audit is just like post-mortem of the situation. But a regular programme of auditinghelps the management to find out some significant trends. The probability of some seriousincidents hitting the organisation could he visualised and some remedial steps could beinitiated. This ensures smooth running of an organisation in addition to controlling stressfulsituations, crises and conflicts.

The management has to, therefore, arrange for regular annual audit of almost all thepersonnel policies and practices. Certain indicators like absenteeism and employees’grievances should be audited at the end of every month/quarter depending upon themagnitude of the issues.

20.9.1 Types of Audit

Personnel audit may be done either by internal people or by external people. Internalaudit is done by the employees in the personnel department. This kind of audit is calledinternal audit. The audit may be conducted by external specialists or consultants inpersonnel management. This type of audit is called external audit.

20.9.2 Audit report

The audit has to examine the various personnel reports, personnel policies and practices.Then the auditor has to record his observations, findings, prepare a report compiling allthese findings and advance useful recommendations for the improvement of personnelmanagement practices. The auditor submits a written report of his findings, conclusionsand recommendations. The most common elements of the report are given below:

i. Table of contents

ii. Preface

iii. Statement of the objectives, methodology, scope and techniques used.

iv. A synopsis containing the summary and conclusions of the audit that has beencarried out.

v. A clear and in-depth analysis of the data and information, furnished area-wise ordepartment-wise.

vi. Evaluation, discussions and analysis. This part covers findings and suggestionsoffered by the auditor.

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Auditing HR Functionsvii. Appendix – this includes supporting data and information which is not necessary inthe main part of the report.

viii. Bibliography – important books and journals which are necessary for future readingare also included at the end.

20.10 PROBLEMS IN HR AUDIT

The rules, systems and regulations for financial audit are well developed. But it is verydifficult to audit personnel policies and practices. Personnel audit involves comparisonwith past ratios, rates of turnover, expenditure etc., with those of other departments andorganisations. The organisation by itself cannot be taken as standard for comparison anda decision arrived at. Hence, it is difficult to conduct the personnel audit. There may bea tendency to turn the survey into a fault-finding process. Every employee may then tryto pass the buck. The audit may create more troubles than solutions. The audit has to bedone carefully. It must evaluate things in an objective way, find out what has gone wrongand suggest improvements. The emphasis must be on rectifying things rather than faultfinding.

20.11 FUTURE OF HRM FUNCTION

Even in the most archaic factories of today, ‘job’ has evolved to mean work that’s morethan just cutting or grinding a piece of metal. It means being able to operate more thanone machine, self-maintain quality, read statistical charts and graphs and troubleshootmachine problems. The white-collar job has been transformed no less. The employee ofa modern corporation no longer pushes paper from in-box to out-box. Instead, he mustcoordinate with all the constituents of the corporation (like suppliers, customers, andeven other employees), communicate, analyse and make vital decisions—typically inthat order.

Tomorrow, the order will change. Sophisticated infotech systems will automatically takecare of the coordination and communication bit. It will even crunch mountains of discretesets of information to throw up intelligent patterns.

The biggest challenge to the employee at Future Inc. would lie in the way he chooses touse that information. In other words, the worker @ futureinc.com would be a knowledgeworker; in varying degrees, he or she would need to seek ways of constantly addingvalue to the task at hand. Employees would need to look at jobs as entrepreneurialassignments, and employers should treat them accordingly.

Check Your Progress

1. State True or False.

(a) The main purpose of safe health to have strong fighting power in anorganisation. ( )

(b) Industrial health is essential to improve quality & productivity of work. ( )

(c) Leave, payroll, are explain of personnel records ( )

(d) Top managerial thinks of personnel audit regularly. ( )

2. What are the problems in HR audit ?

3. What is the difference between effectiveness ratio and Accident ratio in HRaudit process?

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Human Resource Management 20.12 LET US SUM UP

The major areas of personnel audit include programming, forecasting and scheduling tomeet organisation and personnel needs. The personnel audit should probe much deeper,evaluating personnel policies, programmes, philosophy, practices and concepts comparingwith standards and with those of the personnel records of the said organisation and otherorganisations. Generally top management thinks of personnel audit only when seriouscrisis occurs like strikes, increase in the number and/or magnitude of grievances orconflicts, etc. This type of audit is just like post-mortem of the situation. But a regularprogramme of auditing helps the management to find out some significant trends. Thewhite-collar job has been transformed no less. The employee of a modern corporationno longer pushes paper from in-box to out-box. Instead, he must coordinate with all theconstituents of the corporation (like suppliers, customers, and even other employees),communicate, analyse and make vital decisions—typically in that order.


As the HR manager of a large auto components unit, safety is one of your majorresponsibilities. You have decided to conduct safety analysis of some jobs. Before ahead,you need a formal approval from the CEO. He now asked you to explain:

(i) Why the exercise is undertaken in view of the low accident rate history in the past?

(ii) why the analysis is limited to certain jobs?

(iii) The time and cost implications of the analysis, and

(iv) Whether the whole thing is likely to backfire in view of opposition from workers,unions etc.

20.14 KEYWORDS

Personnel Audit

Effectiveness Ratio

Accident Ratios

Utility Records

Employment Ratio

Bonus


1. Write a short note on:

(i) HR Audit Process

(ii) Scope of Personnel Audit

(iii) The Trade Unions Act, 1926

2. What do you mean by personnel audit? Give its need and benefits.




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Auditing HR FunctionsRobert L. Gibson and Marianne H. Mitchell, Introduction to Counselling andGuidance, VI edition, PHI, 2005.




7079562 Human Resource Management

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